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The impact of fiscal policies on agricultural household decisions

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  • Glauben, Thomas
  • Herzfeld, Thomas
  • Loy, Jens-Peter
  • Renner, Swetlana
  • Hockmann, Heinrich

Abstract

This paper provides a comparative static analysis of farm household's production, consumption, and labor market decisions under alternative tax policies. We explore the implications of non-separable household decisions caused by widespread non-participation in labor, land, financial and/or food markets, as is typical of low income economies. The analytical results indicate that when labor market imperfections occur, most tax-induced responses are ambiguous, mainly due to shadow price effects. This is particularly the case for the labor market and production responses to most tax tools under study, while a decreasing demand for consumption goods appears to be the result in several cases. Furthermore, tax-induced allocation effects may differ between the non-separable and the separable model versions, indicating the potential impact of labor market constraints on farm household responses to tax policies. In particular, standard taxes as well as a land tax may imply production adjustments in the case of non-separability.

Suggested Citation

  • Glauben, Thomas & Herzfeld, Thomas & Loy, Jens-Peter & Renner, Swetlana & Hockmann, Heinrich, 2012. "The impact of fiscal policies on agricultural household decisions," Economic Modelling, Elsevier, vol. 29(2), pages 166-177.
    • Handle: RePEc:eee:ecmode:v:29:y:2012:i:2:p:166-177
    DOI: 10.1016/j.econmod.2011.09.010
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    More about this item

    Keywords

    Agricultural household model; Non-separability; Taxation;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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