Abstract
The paper explores the effects of imposing an agricultural tax based on inefficiency (the deviation of actual output from potential output). The analysis is carried out in the context of an abstract partial equilibrium model where a farmer has two sources of income: agricultural production and ‘usury income’. We derive three propositions on the basis of utility maximisation: (1) wealthier farmers lend a higher proportion of their wealth and use a lower proportion for productive activities; (ii) an increase in the inefficiency tax rate reduces money lending and increases the proportion of wealth productivity used; and (iii) an increase in the inefficiency tax rate increases output. A final section discusses the limitations of the analysis with suggestions for further research.
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© 1986 The Indian Econometric Society
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Chatterji, M., Junankar, P.N. (1986). Agricultural Taxation in Less Developed Countries: Effects of a Tax on Inefficiency. In: Development Economics. Palgrave Macmillan, London. https://doi.org/10.1057/9781137555229_5
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DOI: https://doi.org/10.1057/9781137555229_5
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-71714-9
Online ISBN: 978-1-137-55522-9
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