Get access

Redistributing Income and Relative Efficiency

Authors

  • Sam Allgood

    1. Associate Professor, Department of Economics, University of Nebraska, Lincoln, NE 68588–0489. Phone 1–402–472–3367, Fax 1–402–472–9700, E-mail sallgood@unl.edu
    Search for more papers by this author
    • *

      I am grateful for the helpful comments of Arthur Snow and three anonymous referees.


Abstract

This article considers the relative efficiency of marginally redistributing income from high- to low-income households. Additional spending on a negative income tax is compared with spending on an earnings or a wage subsidy. One set of reforms imposes the same burden on the nonpoor, and another set redistributes the same net benefit to the working poor. Additional spending on a negative income tax is more efficient than spending a similar amount on an earnings subsidy (the Earned Income Tax Credit), for some reforms and parameters. The wage subsidy is the most efficient, independent of parameters or type of reform.

Get access to the full text of this article

Ancillary