Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/312005 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 17566
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
How much does society value redistribution? The common method to derive inverse-optimum welfare weights is by inverting an optimal-tax model. Our alternative imposes fewer restrictions on labor supply and enables comparisons across household types. We use a structural labor supply model to calculate the marginal value of public funds for various small tax reductions, directly linked to welfare weights. An application to Germany finds: i) The tax-transfer system is optimal if society values one additional Euro for the bottom decile three times as much as for the median. ii) At low-medium incomes, weights for couples exceed those for singles substantially.
Subjects: 
inverse optimum
microsimulation
marginal value of public funds
social welfare function
optimal taxation
labor supply
efficiency
JEL: 
H21
H31
J22
Document Type: 
Working Paper

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