Benefit Incidence with Incentive Effects, Measurement Errors and Latent Heterogeneity

Ravallion, Martin ; Chen, Shaohua

World Bank, Washington, DC

关键词: ABSOLUTE VALUE;    ACCOUNTING;    AGGREGATE INCOME;    ANTI-POVERTY;    AVERAGE INCOME;   

DOI  :  10.1596/1813-9450-6573
RP-ID  :  WPS6573

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Empirical studies of tax and benefitincidence routinely ignore behavioral responses andmeasurement errors. This paper offers an econometric methodof estimating the mean benefit withdrawal rate (marginal taxrate) allowing for incentive effects, measurement errors,and correlated latent heterogeneity in incidence. Under themethod's identifying assumptions, a feasibleinstrumental variables estimator corrects for incentiveeffects and measurement errors, and provides a bound for thetrue value when there is correlated incidence heterogeneity.A case study for a large cash transfer program in Chinaindicates that past methods of assessing benefit incidenceusing either nominal official rates or raw tabulations fromsurvey data are deceptive. The program entails a nominal 100percent benefit withdrawal rate -- a poverty trap. However,the paper finds that the actual rate is much lower, andclearly too low in the light of the literature on optimalincome taxation. The paper discusses likely reasons based onthe qualitative observations.