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Article Dans Une Revue Journal of Economic Theory Année : 2021

Pareto-improving structural reforms

Résumé

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.
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Dates et versions

halshs-03238866 , version 1 (09-05-2023)

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Paternité - Pas d'utilisation commerciale

Identifiants

Citer

Gilles Saint-Paul. Pareto-improving structural reforms. Journal of Economic Theory, 2021, 194, ⟨10.1016/j.jet.2021.105262⟩. ⟨halshs-03238866⟩
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