If we knew ability, how would we tax individuals?

Plug, Erik; Praag, B.M.S. van; Hartog, Joop

doi:10.1016/s0047-2727(98)00086-3

Cited by 38 publications

(13 citation statements)

References 33 publications

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“…With help of our results of Table 2 we are able to shed light on this question. Within the Leyden welfare methodology welfare effects are usually expressed in terms of equivalence scales [8,9,13,15,17]. In this section, we will express the effects of a CVD on welfare in terms of equivalence scales.…”

Section: Equivalent Variations To Compensate For Losses In Welfarementioning

confidence: 99%

“…The Leyden welfare function is developed and corroborated in a large body of research and has been used to calculate the compensating variation of changes in household size, climate, and schooling and intelligence [8][9][10][11][12][13][14][15][16][17]. However, to the best of our knowledge, the Leyden method has never been used to estimate the equivalent variation of a health change.…”

Section: Introductionmentioning

confidence: 99%

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Money for health: the equivalent variation of cardiovascular diseases

2004

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This paper introduces a new method to calculate the extent to which individuals are willing to trade money for improvements in their health status. An individual welfare function of income (WFI) is applied to calculate the equivalent income variation of health impairments. We believe that this approach avoids various drawbacks of alternative willingness-to-pay methods. The WFI is used to calculate the equivalent variation of cardiovascular diseases. It is found that for a 25 year old male the equivalent variation of a heart disease ranges from 114,000 euro to 380,000 euro depending on the welfare level. This is about 10,000 euro - 30,000 euro for an additional life year. The equivalent variation declines with age and is about the same for men and women. The estimates further vary by discount rate chosen. The estimates of the equivalent variation are generally higher than the money spent on most heart-related medical interventions per QALY. The cost-benefit analysis shows that for most interventions the value of the health benefits exceeds the costs. Heart transplants seem to be too costly and only beneficial if patients are young.

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Section: Equivalent Variations To Compensate For Losses In Welfarementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Money for health: the equivalent variation of cardiovascular diseases

2004

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“…In a situation where technological advances require such re-allocation, the rigidity inherent in enterprise bargaining would prevent many profitable re-allocations from happening. Think only of the seniority system that operates in many firms; or the fact that demotions are only now becoming a legal possibility in many civil service jobs in Australia (the Australian 10 There is an old theory literature on optimal taxation that has argued one should ideally tax talent rather than income (see Plug et al . (1999) for a good overview of this notion of Tinbergen taxes).…”

Section: (Iv) Industrial Relations Reformsmentioning

confidence: 99%

“…10 10 There is an old theory literature on optimal taxation that has argued one should ideally tax talent rather than income (see Plug et al . (1999) for a good overview of this notion of Tinbergen taxes).…”

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confidence: 99%

From Golden Age to Golden Age: Australia's ‘Great Leap Forward’?*

Frijters

Gregory

2006

Economic Record

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I IntroductionDuring the 25 years following World War II, the Australian labour market produced extraordinary outcomes, probably surpassed only by Japan during this period. The labour market absorbed three million immigrants, many with poor English language skills; maintained full employment with unemployment levels often below 1 per cent; and increased average real wages at around 2-3 per cent a year, a rate similar to the USA and those countries of Western Europe with similar levels of economic development. This exceptional performance took place within an institutional framework of strong unions, centralised wage fixing, a compressed wage structure and an extensive welfare system. 1 Any analysis of this period would conclude that from a labour market perspective this was a golden age; all parts of the labour market were growing along a steady growth path with advantages for all. Of course, there were economic cycles, but even these seemed, in labour market terms, to be extremely benign. The most serious recession, that of 1961-1962, saw a brief unemployment increase to just over 2 per cent.* We thank the economists at the RSSS, the editor, Paul Miller, two anonymous referees and Jaques Poot for their useful comments on earlier versions of the paper. All errors are ours. Of course, Eva Klug has contributed a great deal as usual.JEL classification: J0, D6, E6, L5, O3 Correspondence : Paul Frijters, School of Economics and Finance, Queensland University of Technology, Garden Point Campus, GPO Box 2434, Brisbane, Qld 4001, Australia. Email: p.frijters@qut.edu.au or paul.frijters@anu.edu.au 1 An interesting research question, never properly answered, was why the Australian performance was so exceptional relative to the USA, for example, where unemployment and inequality were much higher but labour market and welfare institutions more closely approximated those suggested by basic text books for efficient labour market outcomes. Of course, the base level of average real wages was lower than in the USA but this gap primarily originated in the pre-World War II period, and it was relatively easy to attribute it to factors outside the labour market; such as economies of scale and the greater natural resources of the USA. See Pagan (1987) for a discussion of the reasons for what he terms 'the long boom' and its end. 208ECONOMIC RECORD JUNE

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“…Tinbergen (1970) therefore proposed a tax on 'talent' since talent does not change. Plug et al (1999) attempted to calculate how high such a talent tax should have to be, using a Dutch dataset with information on income and IQ. In this exercise the authors acknowledge that if talent were truly used as a basis for taxation, then individuals might endeavour to have their talent mismeasured.…”

Section: Introductionmentioning

confidence: 99%

The Optimality of Tax Transfers: What does Life Satisfaction Data Tell Us?

2011

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This paper addresses an important policy question: who gets the largest utility gain from income and does the tax system adequately reflect this? We address this question by using Australian panel data and taking life satisfaction as a proxy for utility, allowing us to identify the marginal utility of additional income for different groups of individuals. We find that optimal transfers consist of transfers from the old to the middle aged, and from the married to the unmarried. This optimal utilitarian welfare policy is then contrasted with information on who actually receives transfers and who pays for them in Australia, where we find that taxes are too high for some groups, like the young, and that they are too low for other groups, like the elderly. We believe that the methodology developed in this paper could be fruitfully applied to the issue of optimal taxation in other countries.

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If we knew ability, how would we tax individuals?

Cited by 38 publications

References 33 publications

Money for health: the equivalent variation of cardiovascular diseases

Money for health: the equivalent variation of cardiovascular diseases

From Golden Age to Golden Age: Australia's ‘Great Leap Forward’?*

The Optimality of Tax Transfers: What does Life Satisfaction Data Tell Us?

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