Who Should Get Money? Estimating Welfare Weights in the U.S.

Evaluating the desirability of a reform typically involves weighing the gains of winners against the losses of losers using welfare weights, which measure the value that society places on a $1 increase in an individual’s consumption. They can capture various normative ideals like utilitarianism and equality of opportunity. We elicit the welfare weights of the U.S. general population using experiments and show their robustness, validity, and temporal stability. We estimate an income elasticity of welfare weights between −0.78 and −0.70, which is roughly 5-9 times more progressive than the weights implied by U.S. tax and transfer policies. The optimal marginal tax rates based on our estimates of welfare weights are 28-30 percentage points higher, on aver- age, than the current tax rates in the U.S.