Welfare Analysis of Tax Reforms Using Household Data
NBER Technical Working Paper No. 16
The paper discusses a methodology for calculating the distribution of gains and losses from a policy change using data for a large sample of households. Estimates are based on the equivalent income function, which is money metric utility defined over observable variables. This enables calculations to be standardised, and a computer program to compute the statistics presented in the paper is available for a general demand system. Equivalent income is related to measures of deadweight loss, and standard errors are computed for each of the welfare measures. An application to UK data for 5895 households is given which simulates a reform that involves eliminating housing subsidies.
Published: King, Mervyn A. "Welfare Analysis of Tax Reforms Using Data." Journal of Public Economics, Volume 21, Issue 2, July 1983, Pages 183-214