Generalized compensation principle
Journal
Theoretical Economics
ISSN
1933-6837
Type
journal article
Date Issued
2023
Author(s)
Abstract
Economic disruptions generally create winners and losers. The compensation problem consists of designing a reform of the existing income tax system that offsets the welfare losses of the latter by redistributing the gains of the former. We derive a formula for the compensating tax reform and its impact on the government budget when only distortionary tax instruments are available and wages are determined endogenously in general equilibrium. We apply this result to the compensation of robotization in the United States.
Language
English
Keywords
Compensation principle
distortionary taxation
general equilibrium
wage disruption
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
The Econometric Society
Volume
18
Number
4
Subject(s)
Division(s)