Integrating Expenditure and Tax Decisions: The Marginal Cost of Funds and the Marginal Benefit of Projects
By Joel B. Slemrod, Shlomo Yitzhaki. National tax journal, 2001
117 citations recorded by the source corpus.
This paper seeks to clarify the extent to which the rule for providing public goods ought to correct for the distortionary cost of raising funds. We argue that, in evaluating public projects, the marginal cost of funds (MCF) concept must be supplemented by a symmetrical concept, which we label the marginal benefit of public projects, or MBP, which indicates the value to individuals of the dollars spent. Each of these concepts can be decomposed into two separate components, one reflecting efficiency and the other characterizing the distributional impact of the project itself or its financing. We conclude that efficiency of the financing cannot be ignored, that distributional considerations are also relevant, and that the availability and optimality of tax instruments is critical for evaluating the appropriateness of proceeding with a public good-cum financing project. However, one can construct special cases, as in Kaplow (1996), where the simple cost-benefit criterion applies.
Subfields: Economics and Econometrics, Political Science and International Relations
View Paper: https://www.semanticscholar.org/paper/8ffb276f1851a1ff230288c09248181649918e0c
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Citations in the corpus
- Welfare Analysis Meets Causal Inference (2020, unknown): “In related work by Slemrod and Yitzhaki (1996, 2001) and Kleven and Kreiner (2006), it is referred to as the “marginal cost of funds” (or “marginal benefit of projects” in the case of expenditures).”
- The Policy Elasticity (2016, methodology): “(Smeeding (1982)) and Puerto Rico (Moffitt (1989)).”