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Is there a case for an optimal export tax on perennial crops?

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  • Takamasa Akiyama
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    Abstract

    The idea of an optimal export tax on a commodity is based on the assumption that by imposing a tax, a country can improve its welfare whenit faces a downward-sloping demand curve for the commodity. The idea is thought to be particularly relevant to producers with large world market shares for primary commodities for which the price elasticity of demand is low. An export tax is considered necessary because the scattered farmers'expected marginal revenue is higher than the marginal revenue of the country as a whole. The author uses a model to calculate the optimal tax and to evaluate the effect of the tax and other factors on welfare. Simulation results show that the optimal level of the export tax depends on how farmers and government form their expectations of future prices. The author found that the tax is indeterminate when the government does not know how farmers form their expectations and when farmers'expectations are independent of recent prices or taxes. The author concludes that in imposing an export tax on perennials, a government should give less consideration to the tax's optimality and more to how the tax affects welfare distribution and long-term production.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 854.

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    Date of creation: 29 Feb 1992
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    Handle: RePEc:wbk:wbrwps:854

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    Keywords: Markets and Market Access; Economic Theory&Research; Environmental Economics&Policies; Public Sector Economics&Finance; Access to Markets;

    References

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    1. Bateman, Merrill J. & Meeraus, Alexander & Newbery, David M. & Okyere, William Asenso & O'Mara, Gerald T., 1990. "Ghana's cocoa pricing policy," Policy Research Working Paper Series 429, The World Bank.
    2. Newbery, David M, 1989. "The Theory of Food Price Stabilisation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 99(398), pages 1065-82, December.
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    Cited by:
    1. Akiyama, Takamasa & Baffes, John & Larson, Donald F. & Varangis, Panos, 2003. "Commodity market reform in Africa : some recent experience," Policy Research Working Paper Series 2995, The World Bank.
    2. Akiyama, Takamasa & Larson, Donald F. & DEC, 1994. "The adding-up problem : strategies for primary commodity exports in sub-Saharan Africa," Policy Research Working Paper Series 1245, The World Bank.
    3. Burger, Kees, 2008. "Optimal export taxes – the case of cocoa in Cote d'Ivoire," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain, European Association of Agricultural Economists 6395, European Association of Agricultural Economists.
    4. Krishna, K., 1993. "The Adding Up Problem: A Tergeting Approach," Papers, Pennsylvania State - Department of Economics 10-93-33, Pennsylvania State - Department of Economics.
    5. Olga Solleder, 2013. "Panel Export Taxes (PET) Dataset: New Data on Export Tax Rates," IHEID Working Papers, Economics Section, The Graduate Institute of International Studies 07-2013, Economics Section, The Graduate Institute of International Studies, revised 04 Apr 2013.
    6. Rifin, Amzul & Nauly, Dahlia, 2013. "The Effect of Export Tax on Indonesia’s Cocoa Export Competitiveness," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia, Australian Agricultural and Resource Economics Society 152175, Australian Agricultural and Resource Economics Society.

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