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Marginal and non-marginal commodity tax reforms with rank two and rank three demographic demand systems

Citation

Ray, R, Marginal and non-marginal commodity tax reforms with rank two and rank three demographic demand systems, Oxford Economic Papers, 51, (4) pp. 689-712. ISSN 0030-7653 (1999) [Refereed Article]

DOI: doi:10.1093/oep/51.4.689

Abstract

This paper shows that the insensitivity of marginal commodity tax reforms to demand specification does not extend to the non-marginal case. The size of the tax change has a sharp impact on commodity tax reforms. Unlike price effects, neither household composition nor quadratic Engel curves alters significantly the direction of tax change. The first order approximation overestimates the welfare cost of tax change, and the bias increases sharply with the size of the change. The quality of the approximation also deteriorates with increasing inequality aversion making a Rawlsian less likely than an utilitarian to use the marginal framework.

Item Details

Item Type:Refereed Article
Research Division:Economics
Research Group:Applied Economics
Research Field:Welfare Economics
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Taxation
Author:Ray, R (Professor Ranjan Ray)
ID Code:17437
Year Published:1999
Web of Science® Times Cited:6
Deposited By:Economics and Finance
Deposited On:1999-08-01
Last Modified:2011-11-23
Downloads:0

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