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Generalized Compensation Principle

Tsyvinski, Aleh and Werquin, Nicolas (2019) Generalized Compensation Principle. TSE Working Paper, n. 19-1051, Toulouse

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Abstract

Economic disruptions (techonological change, trade liberalization, immigration flows) generally create winners and losers, i.e., wage gains for some individuals and wage losses for others. The compensation problem consists of designing a reform of the existing income tax system that offsets the wefare losses by redistributing the gains of the winners. We derive a closed-form 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 automation in the U.S. and Germany.

Item Type: Monograph (Working Paper)
Language: English
Date: November 2019
Place of Publication: Toulouse
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 20 Nov 2019 12:18
Last Modified: 12 Feb 2020 14:12
["eprint_fieldname_oai_identifier" not defined]: oai:tse-fr.eu:123702
URI: http://publications.ut-capitole.fr/id/eprint/32925

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