Excerpt
Excerpt
The Policy Elasticity. Nathaniel Hendren, October 2013, Paper. "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 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 on the government budget is sufficient for all behavioral responses..." Link