Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316153 
Year of Publication: 
2024
Series/Report no.: 
Texto para discussão No. 708
Publisher: 
Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio), Departamento de Economia, Rio de Janeiro
Abstract: 
This paper develops a general framework to construct optimal policy reforms starting from a status quo set of policies. We show that if a policymaker can control how fiscal externalities are spent, then the welfare-weighted marginal value of public funds (WMVPF) is the relevant sufficient statistic for determining optimal policy reforms. If a policymaker cannot control how fiscal externalities are spent, then the welfare-weighted net social benefit (WNSB) is the relevant sufficient statistic. If a policymaker can control how a fraction of fiscal externalities are spent, then the relevant sufficient statistic is an "internal WMVPF" plus an "external correction" term. We provide a number of stylized examples to illustrate when in practice to use the WMVPF vs. the WNSB to determine optimal policy reforms.
Subjects: 
optimal reforms
marginal value of public funds
net social benefit
sufficient statistics
JEL: 
H20
H30
H50
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.