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The Welfare Effects of the Reagan Deficits: A Portfolio Choice Approach
Author(s) -
BenGad Michael
Publication year - 2004
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1093/ei/cbh072
Subject(s) - economics , portfolio , counterfactual thinking , welfare , asset (computer security) , population , econometrics , monetary economics , demographic economics , financial economics , demography , philosophy , computer security , epistemology , sociology , computer science , market economy
I analyze the incidence of U.S. fiscal policy using a two‐period, general equilibrium portfolio choice model with imperfect capital markets. Using data from the 1983–89 Panel Survey of Consumer Finances, I divide the population into three groups according to their 1982 portfolio choices and calculate average tax rates for each class of asset holders. Compared to the counterfactual of constant tax rates, the high deficits of the 1980 s harmed the welfare of two large minorities concentrated in both the higher‐ and lower‐income groups, but benefited the majority whose income fell largely in the middle of the income distribution.