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TAX POLICY AND FOOD SECURITY: A DYNAMIC ANALYSIS

Published online by Cambridge University Press:  28 June 2019

Pawan Gopalakrishnan  and
Anuradha Saha
Pawan Gopalakrishnan
Affiliation:
Strategic Research Unit, Reserve Bank of India
Anuradha Saha*
Affiliation:
Ashoka University
*
Address correspondence to: Ashoka University, Sonepat – 131029. E-mail: anuradha.saha@ashoka.edu.in. Telephone: +91 9582370588.
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Abstract

We investigate the sectoral and the distributional effects of a food subsidy program, where food consumption in the economy is subsidized by taxing the manufacturing good producers. In a two-agent model comprising of farmer and industrialist households, agents consume food to accumulate health. Simulations indicate that while the subsidy program increases food output and agents’ health both in the short run and the long run, manufacturing output and aggregate real GDP appear to fall in the short run and increase only in the long run. The program does not make both agents better off and exhibits social welfare gains for a limited range of subsidies.

Keywords

Allocative EfficiencyFiscal PolicyFood SecurityWelfareEconomic Growth
Type
Articles
Information
Macroeconomic Dynamics , Volume 25 , Issue 3 , April 2021 , pp. 795 - 823
Copyright
© Cambridge University Press 2019

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Footnotes

We thank Chetan Ghate, Satya P. Das, Amartya Lahiri, Alok Johri, Thomas Seegmuller, Luca Gori, Mauro Sordini, Angelo Antoci, two anonymous referees, and participants from NED-CICSE 2017, the LKYSPP Development Economics and Policy (DeEP) Conference, the 2015 Australasian Development Economics Workshop, the 10th Annual Conference on Economic Growth and Development (ISI Delhi), and the 14th PET Meetings (Seattle) for insightful comments. Views expressed in this paper are personal.

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