Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128388
Authors: 
Bjertnæs, Geir
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5689
Abstract: 
Recent estimates of the marginal cost of public funds differ substantially. Some studies argue that the efficiency cost of taxation counter the welfare gain connected to redistribution of income. Hence, the efficiency cost of taxation should not be included as a cost of public goods provision. Kleven and Kreiner (2006), however, argue that the cost of public goods provision may double in countries with a large welfare state due to exit from the labor market. This study shows that the cost of public goods provision should be increased with less than 15 percent when categorical transfers redistributed income even though taxation may lead to exit from the labor market.
Subjects: 
marginal cost of public funds
optimal income taxation
categorical transfers
tagging
JEL: 
H21
H23
H41
Document Type: 
Working Paper

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