Pareto-improving structural reforms

• 成果类型: Article
• 署名作者: Saint-Paul, Gilles
• 署名单位: Universite PSL; Ecole Normale Superieure (ENS); New York University; New York University Abu Dhabi
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2021.105262
• 发表日期: 2021
• 关键词: Structural reform; deregulation; Price controls; Pareto optimality; taxation; Compensatory transfers

摘要

Economists recommend to partly redistribute gains to losers from a structural reform, which in many cases may be required for making the reform politically viable. However, taxation is distortionary. Then, it is unclear that compensatory transfers can support a Pareto-improving reform. This paper provides sufficient conditions for this to occur, despite tax distortions. In a setting where preferences are isoelastic, deregulation is implementable in a Pareto-improving way through compensatory lump-sum transfers, despite that these are financed by distortionary taxes. In a more general setting, there always exist Pareto-improving reforms but they may involve tightening regulation for some goods. I show that if demand cross-price elasticities are not be too large and that the reform is not too unbalanced, deregulation is again implementable in a Pareto-improving way. Finally, I consider counter-examples where some people earn rents associated with informational or institutional frictions, or where non homothetic preferences may make the schemes considered here not viable. (c) 2021 Elsevier Inc. All rights reserved.