Marginal and Non-marginal Commodity Tax Reforms with Rank Two and Rank Three Demographic Demand Systems
AbstractThis paper shows that the insensitivity of marginal commodity tax reforms to demand specification does not extend to the nonmarginal 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. Copyright 1999 by Royal Economic Society.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 51 (1999)
Issue (Month): 4 (October)
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Other versions of this item:
- Ray, R, 1997. "Marginal and Non Marginal Commodity Tax Reforms with Rank Two and Rank Three Demographic Demand Systems," Papers 1997-02, Tasmania - Department of Economics.
- B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
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- Alessandro Santoro, 2007.
"Marginal Commodity Tax Reforms: A Survey,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 21(4), pages 827-848, 09.
- Rinaldo BRAU & Massimo FLORIO, 2004.
"Privatisations as price reforms: Evaluating consumers' welfare changes in the U.K,"
Annales d'Economie et de Statistique,
ENSAE, issue 75-76, pages 109-133.
- R. Brau & M. Florio, 2002. "Privatisations as price reforms: evaluating consumers' welfare changes in the UK," Working Paper CRENoS 200204, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
- Massimo Florio & Rinaldo Brau, 2001. "Privatisations as price reforms: an analysis of consumers' welfare change in the U.K," Departmental Working Papers 2001-19, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
- Urakawa, Kunio & Oshio, Takashi, 2010. "Comparing marginal commodity tax reforms in Japan and Korea," Journal of Asian Economics, Elsevier, vol. 21(6), pages 579-592, December.
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