Implicit social preferences in the Norwegian system of indirect taxation

The revelation of implicit social preferences is a fresh field of econometrics. In this paper the theoretical setting is a model of optimal indirect taxation. A parametric preference function is specified, which makes it possible to separate and quantify three different effects. First, it provides a condensed quantitative measure of the degree of income inequality aversion. Second, a set of parameters evaluate external social costs induced by the consumption of certain commodities. Finally, the function allows estimation of implicit equivalent income scales. The authors consider the results as a source of information about an important part of Norwegian tax policy.