Schmölders prize 2026 awarded to Emanuel Hansen

The paper „Pareto-improving tax reforms and the Earned Income Tax Credit“ by Felix J. Bierbrauer, Pierre C. Boyer und Emanuel Hansen makes a fundamental contribution to public finance. By developing a novel approach to identifying Pareto-improving tax reforms, it becomes possible for the first time to formulate necessary and sufficient conditions for their existence—captured in the succinct insight: “Two brackets are enough.” Applied to the introduction of the Earned Income Tax Credit (EITC) in the United States in 1975, the analysis shows that the tax system prior to the reform was not Pareto efficient and that the specific design of the reform did not constitute a Pareto improvement. At the same time, it becomes clear that a more broadly designed system of in-work benefits could indeed have had the potential to achieve a genuine Pareto improvement. Beyond this specific application, the approach opens up a wide range of further uses in the analysis of taxation and transfers.

By combining theoretical rigor, institutional expertise, and evidence-based impact analysis, the paper stands firmly in the tradition of Schmölders’ behaviorally oriented approach to economics and social science, convincingly demonstrating its potential for research in public finance.

LINK to the paper: Pareto-improving tax reforms and the Earned Income Tax Credit | The Econometric Society