Equity-efficiency implications of a European tax and transfer system
- This study simulates three income tax scenarios in a Mirrleesian setting for 24 EU countries using data from the 2014 Structure of Earnings Survey. In scenario 1, each country individually maximizes its own welfare (benchmark). In scenarios 2 and 3, total welfare in the EU is maximized over a common budget constraint. Unlike scenario 2, the social planner of scenario 3 differentiates taxes by country of residence. If a common tax and transfer system were implemented in the EU, countries with a relatively higher mean wage rate—particularly those in Western and some of the Northern European countries—would transfer resources to the others. Scenario 2 implies increased labor distortions for almost all countries and, hence, leads to a contraction in total output. Scenario 3 produces higher (lower) marginal taxes for high- (low-) mean countries compared to the benchmark. The change in total output depends on the income effects on labor supply. Overall, total welfare is higher for the scenarios involving a European tax and transfer system despite more than two thirds of all the agents becoming worse off relative to the benchmark. A politically more feasible integrated tax system improves the well-being of almost half of all the EU but considerably reduces the aggregate welfare benefits.
Author: | Eren GürerORCiDGND |
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URN: | urn:nbn:de:hebis:30:3-625576 |
DOI: | https://doi.org/10.1007/s00355-021-01314-1 |
ISSN: | 1432-217X |
Parent Title (English): | Social choice and welfare |
Publisher: | Springer |
Place of publication: | Berlin; Heidelberg |
Document Type: | Article |
Language: | English |
Date of Publication (online): | 2021/03/19 |
Date of first Publication: | 2021/03/19 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2021/09/20 |
Volume: | 57 |
Page Number: | 46 |
First Page: | 301 |
Last Page: | 346 |
Note: | Open Access funding enabled and organized by Projekt DEAL. |
HeBIS-PPN: | 489347169 |
Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Sammlungen: | Universitätspublikationen |
Licence (German): | Creative Commons - Namensnennung 4.0 |