Welfare Evaluation of the 1986 Tax Reform for Married Couples in the United States

Matteo Picchio and Giacomo Valletta ()
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Giacomo Valletta: Maastricht University

No 9378, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper evaluates the welfare effects of the 1986 Tax Reform Act (TRA86). In thirty years since its introduction, several studies have analysed the effects of TRA86. However, preference heterogeneity and non-market dimensions of welfare have not been taken into account. We propose an evaluation of the impact of TRA86 on well-being using different welfare metrics which fully retain preference heterogeneity. We estimate utility functions with preference heterogeneity on the basis of structural models of family labor supply. Then, by way of these estimated preferences, we compute several welfare rankings corresponding to different ethical priors. Finally, we identify the losers and the winners of TRA86 under different ethical priors.

Keywords: welfare measures; tax reform; preference heterogeneity; discrete model; labor supply (search for similar items in EconPapers)
JEL-codes: C25 D63 H22 H31 J22 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2015-09
New Economics Papers: this item is included in nep-dcm, nep-pbe and nep-pub
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Published - published in: International Tax and Public Finance, 2018, 25 (3), 757–807

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Related works:
Journal Article: A welfare evaluation of the 1986 tax reform for married couples in the United States (2018)
Working Paper: A Welfare Evaluation of the 1986 Tax Reform for Married Couples in the United States (2016)
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