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Subsidy Reforms and Poverty Alleviation

  • Chandra Prakash Bhambhri
  • Parkash Chander

This paper presents a general framework for characterizing the optimal pattern of subsidies for poverty alleviation under budgetary constraints and suggests possible reforms for the existing pattern of subsidies. The government may subsidize or tax goods in order to meet its objectives. The paper introduces the concept of a consumer equilibrium and shows that there are cases of equilibria in which reforms can generate not only fiscal savings but also Pareto improve the welfare of both poor and wealthy consumers.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/126.

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Length: 24
Date of creation: 01 Aug 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/126
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  1. Chander, Parkash & Leruth, Luc., 1988. "The Optimal Product-Mix for a Monopolist in the Presence of Congestion Effect: A Model and Some Results," Working Papers 673, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Besley, Timothy & Coate, Stephen, 1991. "Public Provision of Private Goods and the Redistribution of Income," American Economic Review, American Economic Association, vol. 81(4), pages 979-84, September.
  3. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  4. Ehtisham Ahmad & Luc E. Leruth, 2000. "Indonesia: Implementing National Policies in a Decentralized Context: Special Purpose Programs to Protect the Poor," IMF Working Papers 00/102, International Monetary Fund.
  5. Jaskold Gabszewicz, Jean & Shaked, Avner & Sutton, John & Thisse, Jacques-Francois, 1986. "Segmenting the market: The monopolist's optimal product mix," Journal of Economic Theory, Elsevier, vol. 39(2), pages 273-289, August.
  6. Alderman, Harold & Lindert, Kathy, 1998. "The Potential and Limitations of Self-Targeted Food Subsidies," World Bank Research Observer, World Bank Group, vol. 13(2), pages 213-29, August.
  7. Gupta, Sanjeev & Mahler, Walter, 1995. "Taxation of petroleum products : Theory and empirical evidence," Energy Economics, Elsevier, vol. 17(2), pages 101-116, April.
  8. Schwartz, Gerd & Clements, Benedict, 1999. " Government Subsidies," Journal of Economic Surveys, Wiley Blackwell, vol. 13(2), pages 119-47, April.
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