Affiliations: [a] Economics Department, Southern Methodist University,
Dallas, TX 75275, USA | [b] Economics Department, University of York, York YO1
5DD, England | [c] Graduate School of Management, University of
Texas-Dallas, Richardson, TX 75083, USA
Note: [1] We thank Daniel Slesnick, Rajat Deb and Michael Ferrantino for comments. The
usual caveat applies.
Abstract: In this paper we have delineated a new approach to measuring the
(in)equality-efficiency trade-off in an economy. The approach utilizes aggregate
historical data, and permits values of the trade-off to be estimated ex post for
each policy variable in any chosen bundle, which have been in operation during
the period and could have redistributional implications. We do find evidence of
a trade-off for several policy variables. It is not by any means clear that the
more sophisticated and informationally demanding micro-based approaches to
evaluating the trade-off, which economists have devised, can be as
revealing.
