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Tax Policies And The Labor Market Constrained Farm Household: Theoretical Results And Empirical Evidence From Household Data

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  • Glauben, Thomas
  • Henning, Christian H.C.A.
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    Abstract

    The study is devoted to the comparative static analysis and econometric estimation of farm household decisions under both standard and agricultural taxes. To account for labor markets constraints a non-separable model is constructed implying increasing per-unit costs of accessing labor markets. To control for tax-induced adjustments related to labor market imperfections we compare the results to those derived from a separable approach, assuming perfect labor markets. Theoretical results suggest that most tax-induced responses are ambivalent mainly caused by shadow prices effects. Further, tax-induced effects differ between the two model versions. In particular standard taxes may imply production adjustments in the case of non-separability. Thus, income and value-added taxes are no more necessarily superior to agricultural taxes. Econometric analysis using individual household data from Mid-West Poland indicates remarkable responses to market surplus and input taxes. In contrast, standard and land taxes imply only negligible production adjustments. Thus, they seem to be superior, at least in the Polish case.

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    Bibliographic Info

    Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2002 Annual meeting, July 28-31, Long Beach, CA with number 19700.

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    Date of creation: 2002
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    Handle: RePEc:ags:aaea02:19700

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    Keywords: Labor and Human Capital; Public Economics;

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    1. Mohan Rao, J., 1989. "Taxing agriculture: Instruments and incidence," World Development, Elsevier, vol. 17(6), pages 809-823, June.
    2. Burgess, Robin & Stern, Nicholas, 1993. "Taxation and Development," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 762-830, June.
    3. Deolalikar, Anil B & Vijverberg, Wim P M, 1987. "A Test of Heterogeneity of Family and Hired Labour in Asian Agriculture," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(3), pages 291-305, August.
    4. Jacoby, Hanan G, 1993. "Shadow Wages and Peasant Family Labour Supply: An Econometric Application to the Peruvian Sierra," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 60(4), pages 903-21, October.
    5. Tadashi Sonoda & Yoshihiro Maruyama, 1999. "Effects of the Internal Wage on Output Supply: A Structural Estimation for Japanese Rice Farmers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 81(1), pages 131-143.
    6. Stiglitz, Joseph E & Dasgupta, P, 1971. "Differential Taxation, Public Goods and Economic Efficiency," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(114), pages 151-74, April.
    7. Ahmad,Etisham & Stern,Nicholas, 1991. "The Theory and Practice of Tax Reform in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521397421, 9.
    8. Benjamin, Dwayne, 1992. "Household Composition, Labor Markets, and Labor Demand: Testing for Separation in Agricultural Household Models," Econometrica, Econometric Society, Econometric Society, vol. 60(2), pages 287-322, March.
    9. Munk, Knud Jorgen, 1980. "Optimal Taxation with Some Non-Taxable Commodities," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 47(4), pages 755-65, July.
    10. Michalek, J & Keyzer, M A, 1992. "Estimation of a Two-Stage LES-AIDS Consumer Demand System for Eight EC Countries," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 19(2), pages 137-63.
    11. Diewert, W.E., 1993. "Duality approaches to microeconomic theory," Handbook of Mathematical Economics, Elsevier, in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 12, pages 535-599 Elsevier.
    12. Skoufias, Emmanuel, 1993. "Labor market opportunities and intrafamily time allocation in rural households in South Asia," Journal of Development Economics, Elsevier, vol. 40(2), pages 277-310, April.
    13. Lopez, Ramon E., 1984. "Estimating labor supply and production decisions of self-employed farm producers," European Economic Review, Elsevier, vol. 24(1), pages 61-82.
    14. de Janvry, Alain & Fafchamps, Marcel & Sadoulet, Elisabeth, 1991. "Peasant Household Behaviour with Missing Markets: Some Paradoxes Explained," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 101(409), pages 1400-417, November.
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