The Policy Elasticity

@inproceedings{Hendren2013ThePE,
  title={The Policy Elasticity},
  author={Nathaniel Hendren},
  year={2013}
}
This paper applies basic price theory to study the marginal welfare impact of government policy changes. In contrast to the canonical marginal excess burden framework, the framework presented here does not require a decomposition of behavioral responses to the policy into income and substitution effects. The causal effects of the policy are sufficient. Moreover, in the broad class of models where the government is the only distortion, the causal impact of the behavioral response to the policy… CONTINUE READING

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