The Marginal Cost of Public Funds

An estimate of the marginal cost of public funds (MCF) is critical for the correct evaluation of public projects and for conducting reviews of public expenditure. Estimates of the MCF for different taxes also provide a guide for tax reform by revealing which taxes cause the greatest welfare loss. The Marginal Cost of Public Funds explains the theory behind the MCF, details particular features of the MCF for a range of tax instruments, and most importantly shows how the theory is applied. The book is highly recommended as a text for students seeking an accessible presentation of the theory, and as a manual for applied economists who wish to ensure the employment of best-practice in project evaluation.

Gareth D. Myles, Professor of Economics, University of Exeter, and Research Fellow, Institute for Fiscal Studies

Dahlby's excellent new book will be very useful to all professional public finance economists, as well as graduate students and advanced seniors studying public finance. The marginal cost of public funds is central for understanding issues of tax and deficit policy, as well as benefit cost analysis, and Dahlby, an expert on the subject, has written a book that is clear, comprehensively researched, and important.

Neil Bruce, Department of Economics, University of Washington

The marginal cost of public funds is a central and unifying concept for tax analysis, and Bev Dahlby's important new book provides the first comprehensive treatment of the topic. It carefully lays out the theoretical foundation of the concept, and then illustrates its policy relevance with a series of fascinating real-world applications in both developed and developing countries.

Joel Slemrod, Paul W. McCracken Collegiate Professor of Business Economics and Public Policy, and Director, Office of Tax Policy Research, University of Michigan