The marginal cost of redistribution : lifetime and annual perspectives /
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| Other Authors: | , , |
| Format: | Thesis Book |
| Language: | English |
| Published: |
1988.
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| Subjects: | |
| Online Access: | ProQuest, Abstract Link to OAKTrust copy |
| Abstract: | Because of the difficulty of obtaining lifetime data, the annual approach usually is used to determine both the degree of income inequality and the marginal cost of redistributing $1 of real income to lower income households. Unfortunately, measures of inequality using annual data do not adequately take into account life cycle differences in income. The lower income groups in any given year tend to include a disproportionate number of retired and young people, while the upper income groups have a disproportionate number of middle-aged people. The lifetime approach avoids the differences in income because of age and transitory factors, thereby giving a more accurate overall picture of relative inequality. Well-being is also better measured on a lifetime basis. As households live their lives under a tax-transfer system, the same households receive net transfers in some years and pay net taxes in others. To ignore year to year differences and say that households are better off in years that they receive net transfers and worse off in years that they pay net taxes is inappropriate. More accurately, households are better off if they receive lifetime net transfers and worse off if they pay lifetime net taxes. This dissertation develops a lifetime labor supply model which is used to simulate lifetime and annual income as impacted by changes in taxes and transfers. The income data are then used to compare the lifetime and annual marginal costs of redistribution when the same behavioral assumptions are used for each. In the model, a linear income tax type of redistributive policy is used to simulate the tax-transfer system. The linear income tax is a flat rate tax on wage earnings with the revenues from the tax used to finance equal transfers to all households. Viewing the marginal cost of redistribution from a lifetime approach is highly significant. Redistribution costs are an important consideration in determining redistribution policies and practices. Using the simulation's central case, the marginal cost of redistributing $1 of real income to the lowest income quintile is $2.52 using the annual income distribution, and $4.31 using the lifetime income distribution. |
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| Item Description: | Typescript (photocopy). Vita. "Major subject: Economics." |
| Physical Description: | xiv, 159 leaves : illustrations ; 29 cm |
| Bibliography: | Includes bibliographical references (leaves 126-132). |