Working Paper: NBER ID: w2451
Authors: Shlomo Yitzhaki; Joel Slemrod
Abstract: In this paper, we suggest a method which enables the user to identify commodities that all individuals who can agree on certain weak assumptions with regard to the social welfare function will agree upon as worth subsidizing or taxing in the absence of efficiency considerations. The method is based on an extension of the stochastic dominance criteria and is illustrated using data from Israel.
Keywords: Welfare Dominance; Commodity Taxation; Social Welfare Functions; Stochastic Dominance
JEL Codes: H21; H23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Certain commodities identified for taxation or subsidization (H20) | Guide tax reform without detailed knowledge of inter-personal transfer preferences (H00) |
| Marginal excess burden equal for two commodities (D10) | Social welfare can be improved by shifting taxation from one to the other (H29) |
| Concentration curve of one commodity lies above another (D11) | One commodity dominates in terms of welfare (D69) |
| Concentration curves of two commodities intersect (Q02) | Impossible to establish dominance (D74) |
| MCSD rules allow for identifying pairs of commodities for which welfare dominance is possible (D60) | Ease the process of making tax recommendations (H26) |