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Welfare analysis and redistributive policies

Abstract

Applied welfare analyses of redistributive systems nowadays benefit from powerful tax-benefit microsimulation programs combined with administrative data. Arguably, most of the distributional studies of that kind focus on social welfare defined as a function – typically inequality or poverty indices – of household equivalized income. In parallel, economic research has made considerable progress in the measurement of welfare along several dimensions. Distinct but related branches of the literature have attempted (i) to model different behavior (in a way that matter for incidence and redistribution of tax-benefit policies), (ii) to go beyond income, (iii) to better define and estimate equivalence scales, (iv) to open the household black box and measure welfare at the individual level. I suggest a general framework to critically review these streams of literatures and to discuss whether recent advances in each of these fields have been or could be readily operationalized in welfare analyses and policy simulations.

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Acknowledgements

This paper is based on a keynote presentation at the 20th EUROMOD anniversary conference, ISER, University of Essex, 5th of September 2016. I am very grateful to Frank Cowell for a thorough reading and excellent comments on the text, as well as to Marc Fleurbaey for the point regarding the social welfare aggregation of money-metric utilities.

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Bargain, O. Welfare analysis and redistributive policies. J Econ Inequal 15, 393–419 (2017). https://doi.org/10.1007/s10888-017-9369-3

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Keywords

  • Welfare analysis
  • Redistributive systems
  • Microsimulation
  • Equivalence scales
  • Collective models