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Tax Reform and Shadow Prices for Pakistan

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  • Ahmad, Ehtisham
  • Stern, Nicholas

Abstract

The assumption, which is common in tax analysis, that producer prices are undistorted may not be appropriate, particularly for developing countries. Where shadow prices (social opportunity costs) and market prices differ, one must replace "revenue" in the "social marginal cost of revenue" (a concept developed in their earlier work) by the shadow cost of output or, equivalently, by the shadow revenue. Rankings of goods by the social marginal cost of shadow revenue for Pakistan (using data from the mid-1970s) are presented and shown to depend sensitively on the difference between market and shadow prices as well as on distributional value judgements. Copyright 1990 by Royal Economic Society.

Suggested Citation

  • Ahmad, Ehtisham & Stern, Nicholas, 1990. "Tax Reform and Shadow Prices for Pakistan," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 135-159, January.
  • Handle: RePEc:oup:oxecpp:v:42:y:1990:i:1:p:135-59
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    Cited by:

    1. Anderson, James E., 1997. "Revenue Neutral Trade Reform with Many Households, Quotas and Tariffs," Seminar Papers 626, Stockholm University, Institute for International Economic Studies.
    2. Raghbendra Jha, 2004. "Macroeconomic stabilization and pro-poor budgetary policy in the globalized economy," CAMA Working Papers 2004-08, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    3. Shah, Anwar & Whalley, John, 1990. "An alternative view of tax incidence analysis for developing countries," Policy Research Working Paper Series 462, The World Bank.
    4. Anderson, James E, 2002. "Trade Reform Diagnostics with Many Households, Quotas, and Tariffs," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 215-236, May.
    5. Vásquez Cordano, Arturo L. & Balistreri, Edward J., 2010. "The marginal cost of public funds of mineral and energy taxes in Peru," Resources Policy, Elsevier, vol. 35(4), pages 257-264, December.
    6. Can Erbil, 2004. "Trade Taxes Are Expensive," International Trade 0409002, EconWPA.
    7. Ahmad, Ehtisham & Ludlow, Stephen, 1989. "The distributional consequences of a tax reform on a VAT for Pakistan," Policy Research Working Paper Series 238, The World Bank.

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