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2008•Brazilian Review of EconometricsOpen access

The Revealed Social Welfare Function: USA X Brazil

Enlinson Mattos

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Abstract

This paper proposes the use of the optimal nonlinear tax formula to derive the social welfare function of policymakers. In particular, it uses PSID and PNAD for 1990 to estimate the implicit social welfare functions associated with income tax imposition for the USA and Brazil. Under assumptions on the household preferences, the estimations suggest that both U.S. and Brazilian social welfare functions are concave and Paretian, but that only the Brazilian function is utilitarian, i.e., the Brazilian social planner is less inequity-averse than her U.S. counterpart.

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This paper proposes the use of the optimal nonlinear tax formula to derive the social welfare function of policymakers. In particular, it uses PSID and PNAD for 1990 to estimate the implicit social welfare functions associated with income tax imposition for the USA and Brazil. Under assumptions on the household preferences, the estimations suggest that both U.S. and Brazilian social welfare functions are concave and Paretian, but that only the Brazilian function is utilitarian, i.e., the Brazilian social planner is less inequity-averse than her U.S. counterpart.

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Available abstract

This paper proposes the use of the optimal nonlinear tax formula to derive the social welfare function of policymakers. In particular, it uses PSID and PNAD for 1990 to estimate the implicit social welfare functions associated with income tax imposition for the USA and Brazil. Under assumptions on the household preferences, the estimations suggest that both U.S. and Brazilian social welfare functions are concave and Paretian, but that only the Brazilian function is utilitarian, i.e., the Brazilian social planner is less inequity-averse than her U.S. counterpart.

Key concepts: Social planner, Social welfare function, Welfare, Economics, Social Welfare, Function (biology), Planner, Welfare economics

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