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The impact of fiscal policies on agricultural household decisions

Thomas Glauben (), Thomas Herzfeld (), Jens-Peter Loy, Swetlana Renner () and Heinrich Hockmann ()

Economic Modelling, 2012, vol. 29, issue 2, 166-177

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.

Keywords: Agricultural household model; Non-separability; Taxation (search for similar items in EconPapers)
JEL-codes: H20 H31 Q12 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1016/j.econmod.2011.09.010

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