Together with Pierre C. Boyer and Emanuel Hansen, Felix Bierbrauer, Professor at ECONtribute at the University of Cologne, has been awarded the 2026 Schmölders Foundation Prize for the study “Pareto-Improving Tax Reforms and the Earned Income Tax Credit”.
The prize is awarded annually by the Verein für Socialpolitik (German Economic Association), this year by the Public Economics Committee, chaired by Silke Übelmesser.
In the paper published in Econometrica in 2023, the authors develop a new approach to identifying Pareto-improving tax reforms and, for the first time, formulate necessary and sufficient conditions for their existence – summarized in the concise insight: “Two brackets are enough.” Applied to the introduction of the Earned Income Tax Credit (EITC) in the U.S. in 1975, they show that the tax system was not Pareto-efficient prior to its introduction and that the specific reform did not constitute a Pareto improvement. At the same time, they make it clear that a more broadly designed structure for earned income subsidies would certainly have had the potential for a genuine Pareto improvement. Beyond the specific case study, the approach opens up a wide range of further applications in tax and transfer analysis.
“With its combination of theory, institutional expertise, and evidence-based impact analysis, the work stands in the best tradition of Schmölders’ approach to behavior-oriented economic and social science and convincingly demonstrates its potential for fiscal research,” the jury emphasizes in its commendation.
Congratulations! The award-winning study is available here.