Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/286325 
Year of Publication: 
2022
Series/Report no.: 
IES Working Paper No. 29/2022
Publisher: 
Charles University in Prague, Institute of Economic Studies (IES), Prague
Abstract: 
We provide the first estimate of the elasticity of marginal utility of consumption, μ, for Europe and for thirty individual European countries, using the income-tax individual-level data. Specifically, we rely on the absolute equal-sacrifice approach and CRRA utility function to elicit the revealed preferences of income tax payers on their acceptance of the tax schedule. Our central estimate of μ equals to 1.42. With few exceptional cases, μ's for European countries exceed unity, ranging between 1.2 and 1.90. We further discuss the implications of our estimate of μ for the social discount rate and Social Cost of Carbon. We conclude that the social discount rate might be slightly higher than traditionally assumed, implying lower magnitude of Social Cost of Carbon, at least for Europe.
Subjects: 
elasticity of marginal utility of consumption
equal-sacrifice approach
income tax schedules
marginal tax rate
social discount rate
JEL: 
D60
D61
H24
R13
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.