New estimates of the elasticity of marginal utility of consumption for Europe

We estimate the elasticity of marginal utility of consumption ( \(\mu \) $\mu$ ) for Europe and 32 individual European countries using household-level income tax data. Specifically, we rely on the absolute equal-sacrifice approach to elicit the revealed preferences of income taxpayers on their political preference for income redistribution. Our central estimate of \(\mu \) $\mu$ equals 1.43. With few exceptions, \(\mu \) $\mu$ ’s for European countries exceed unity, ranging between 1.2 and 1.94. We discuss the implications of our estimates for inequality measurement, benefit transfer, and the social discount rate.