Arbeitspapier
Elasticity of Marginal Utility of Consumption: The Equal-Sacrifice Approach Applied for the Czech Republic
We provide the first estimate of the elasticity of marginal utility of consumption, η, for a post-transition economy in the Central & Eastern European region, the Czech Republic, based on individual-level data. The parameter η is a crucial component of the social discount rate (SDR), which determines the inter-temporal allocations that are acceptable to society. Using the equal-sacrifice income tax approach, we obtain a central estimate of η at 1.34, which varies between 1.24 and 1.42 within the study period that covers 2005-2019. Moreover, the estimate of elasticity of marginal utility of consumption differs between various income groups and employment status. Importantly, the magnitude of η estimate depends on whether social benefits are included into gross income or social and health insurance payments are included in the definition of taxes. Our results suggest that SDR for the Czech Republic may be around 3-5 percent for a reasonable pure rate of time preference and positive forecast for per capita consumption growth.
- Language
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Englisch
- Bibliographic citation
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Series: IES Working Paper ; No. 3/2021
- Classification
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Wirtschaft
Welfare Economics: General
Allocative Efficiency; Cost-Benefit Analysis
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
General Equilibrium and Welfare Economic Analysis of Regional Economies
- Subject
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elasticity of marginal utility of consumption
equal-sacrifice approach
income tax schedules
marginal tax rate
social discount rate
- Event
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Geistige Schöpfung
- (who)
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Opatrny, Matej
Scasny, Milan
- Event
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Veröffentlichung
- (who)
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Charles University in Prague, Institute of Economic Studies (IES)
- (where)
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Prague
- (when)
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2021
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Opatrny, Matej
- Scasny, Milan
- Charles University in Prague, Institute of Economic Studies (IES)
Time of origin
- 2021
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