Journal
LAND ECONOMICS
Volume 81, Issue 3, Pages 337-352Publisher
UNIV WISCONSIN
DOI: 10.3368/le.81.3.337
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Many argue that it is socially inefficient to use distributional weights in cost-benefit analysis, and that doing so implies large inefficiency losses, when distributional matters can be dealt with trough income taxation, instead. Our results question this view, by showing a large range of cases when distributional weights are (second-best) optimal to use. One example is when different provided goods affect tax-revenues equally per dollar spent; utility functions that are separable in the provided goods is sufficient for this. Most results hold for linear and non-linear income taxes and whether they are optimal or not. General policy implications are discussed.
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