Let's create an area plot akin to JJZ's figure 4 that we can use to decompose the influence of theta_z and T''(z) on social welfare weights.
To find the social welfare weights without changes in marginal tax rates, set T''(z) to zero in Equation 10. i.e., in applying the sw_weights method, use mtr_prime = 0.
To find the social welfare weights without the effects of the income distribution, set theta_z to zero in Equation 10. i.e., in applying the sw_weights method, use theta_z = 0.
jdebacker
commented
2 years ago
Let's create an area plot akin to JJZ's figure 4 that we can use to decompose the influence of theta_z and T''(z) on social welfare weights.
To find the social welfare weights without changes in marginal tax rates, set T''(z) to zero in Equation 10. i.e., in applying the
sw_weightsmethod, usemtr_prime = 0.To find the social welfare weights without the effects of the income distribution, set theta_z to zero in Equation 10. i.e., in applying the
sw_weightsmethod, usetheta_z = 0.