Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/223430
Authors: 
Bierbrauer, Felix
Boyer, Pierre C.
Hansen, Emanuel
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8358
Abstract: 
This paper provides necessary and sufficient conditions for the existence of Pareto-improving tax reforms. The conditions can be expressed as sufficient statistics and have a wide range of potential applications in public finance. We discuss one such application in detail: the introduction of the Earned Income Tax Credit (EITC) in the US. We find that the EITC can be viewed as a response to an in-efficiency in the tax and transfer system prevailing at the time. This adds a new perspective to the literature on why the EITC is a good idea, emphasizing Pareto improvements rather than equity-efficiency trade-offs.
Subjects: 
tax reforms
non-linear income taxation
optimal taxation
earned income tax credits
pareto efficiency
JEL: 
C72
D72
D82
H21
Document Type: 
Working Paper

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