Internal Seminar: Laurence Jacquet

Generalized Production Efficiency (co-authored with Etienne Lehmann and Stéphane Robin)
We propose an implementable sufficient statistics formula to measure the welfare effects of technological change and government policies affecting production, in general equilibrium when individuals earn income from multiple production factors and face nonlinear income taxation. Our formula quantifies both production efficiency and predistributive effects using economy-specific sufficient statistics that need to be computed only once and can then be combined with the direct factor-price effects of any production policy. We implement our formula on U.S. data for a set of production policies, including robotization, intensification of generative AI and bank branch deregulation. We show that predistributive effects can substantially alter welfare evaluations and, for some calibrations, reverse their sign relative to the production efficiency effects. We then examine how these predistributive effects can be offset by the tax system. Generalizing the Diamond-Mirrlees (1971) Production Efficiency Theorem, we show that policies increasing production at fixed factor supplies can generate Pareto improvements when combined with tax reforms that neutralize their effects on individuals’ utility and factor supplies, even with market failures and nonoptimal nonlinear taxes. When such reforms are unavailable, production gains alone do not guarantee welfare improvements. Finally, when the tax system is optimal with respect to these neutralizing reforms, partial- and general-equilibrium income tax formulas coincide under perfect competition and differ only by a Pigouvian correction under imperfect competition.

Tuesday, October 20, 2026, from 12:00 to 1:00 p.m.

Room A406