Spurious deadweight gains

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Spurious Deadweight Gains

Marshallian consumer surplus (MCS) is generally an inaccurate measure of welfare change because it neglects income effects. Suppose these effects overturn the usual demand response to a price change. Then, the deadweight loss from a distortionary tax or subsidy has the wrong sign, that is, there is a spurious deadweight gain. JEL Classification: D11, D6.

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ژورنال

عنوان ژورنال: Economics Letters

سال: 2001

ISSN: 0165-1765

DOI: 10.1016/s0165-1765(01)00397-4