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The impact of fiscal policies on agricultural household decisions

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

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.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 2 ()
Pages: 166-177

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:2:p:166-177
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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