This paper provides a new and improved measure of the marginal cost of public funds (MCF). It is based on a benchmark tax which is distributionally neutral and non-distortive. This is in contrast to the MCF-measure used in the previous literature, that has used the regressive uniform lump-sum...

This paper provides a new and improved measure of the marginal cost of public funds (MCF). It is based on a benchmark tax which is distributionally neutral and non-distortive. This is in contrast to the MCF-measure used in the previous literature, that has used the regressive uniform lump-sum...