Anderson, James E.Martin, Will2012-06-202012-06-202005-09https://hdl.handle.net/10986/8592The fact that raising taxes can increase taxed labor supply through income effects is frequently used to justify much lower measures of the marginal welfare cost of taxes and greater public good provision than indicated by traditional, compensated analyses. The authors confirm that this difference remains substantial with newer elasticity estimates, but show that either compensated or uncompensated measures of the marginal cost of funds can be used to evaluate the costs of taxation-and will provide the same result-as long as the income effects of both taxes and public good provision are incorporated in a consistent manner.CC BY 3.0 IGOAGGREGATE SUPPLYBENCHMARKBUDGET CONSTRAINTSCOMPETITIVE MARKETCONSUMER DEMANDCONSUMERSDEVELOPING COUNTRIESDISTORTIONARY TAXESECONOMIC RESEARCHECONOMIC REVIEWECONOMIC STUDIESECONOMISTSELASTICITIESELASTICITYELASTICITY OF SUPPLYEMPIRICAL EVIDENCEEQUATIONSEXPENDITURESFISCAL BALANCEFISCAL COSTFISCAL COSTSFISCAL POLICYFOREIGN EXCHANGEGDPGOVERNMENT SPENDINGGROSS DOMESTIC PRODUCTHOUSEHOLD INCOMEINCOMEINCOME EFFECTINCOME EFFECTSINCOME ELASTICITYINCOME GENERATIONINCOME GROUPSINCOME TAXATIONINCOME TAXESINEFFICIENCYINTERMEDIATE GOODSINTERMEDIATE INPUTSINTERNATIONAL TRADELEISURELOW INCOMEMARGINAL BENEFITSMARGINAL COSTMARGINAL COSTSMARGINAL VALUEMARGINAL WELFARE COSTSMARKET PRICESNET IMPACTNUMERAIREOUTPUTOUTPUTSPOLICY ANALYSISPOLICY DECISIONSPOLICY IMPLICATIONSPOLICY MAKERSPOLICY REFORMPOLICY RESEARCHPOLITICAL ECONOMYPRICE CHANGESPRIVATE GOODSPRIVATE SECTORPRODUCERSPRODUCTIVITYPUBLIC ECONOMICSPUBLIC FUNDSPUBLIC GOODPUBLIC GOODSPUBLIC SPENDINGQUOTASREAL INCOMEROADSSENSITIVITY ANALYSISSOCIAL COSTSSOCIAL MARGINAL COSTTAXTAX INCENTIVESTAX RATESTAX REFORMTAX REFORMSTAX REVENUETAX REVENUESTAXABLE INCOMETAXATIONUSER CHARGESVALUATIONWAGESWELFARE EFFECTSWILLINGNESS TO PAYWorld Bank10.1596/1813-9450-3700