INFLUENCE OF DEMOGRAPHIC VARIABLES ON INDIRECT TAX SETTING FOR SELECTED INDIAN STATES

A. K. Seth () and Ankur Bhatnagar ()
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A. K. Seth: Department of Commerce, Delhi School of Economics, University of Delhi, Delhi 110007, India
Ankur Bhatnagar: Satyawati College (M), Ashok Vihar-III, Delhi 110052, India

The Singapore Economic Review (SER), 2008, vol. 53, issue 02, 293-316

Abstract: This paper attempts to provide conclusive evidence in favor of sensitivity of optimal commodity taxes to demographic variables. This involves estimating optimal commodity taxes for the chosen 16 Indian states, incorporating demographic profiles for each state using NSS data. Such calculations are further done under alternative welfare weights for each household. The results reveal that the introduction of demographic variables in the demand system makes the tax rates more non-uniform across commodities and across states, and significantly alters their response to changes in the social planner's perception of a household's welfare. These effects are more pronounced for certain commodities that are basic and essential in a household's basket. Differences in welfare weights also have a similar effect on tax rates, though to a lesser degree.

Keywords: Optimal commodity taxes; demographic variables; social welfare; non-uniform taxes; India (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1142/S0217590808002951

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