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Optimal Demogrants and Taxes in a Federal Welfare State

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  • Ray, Ranjan

Abstract

This paper provides a framework for the simultaneous calculation of optimal commodity and income taxes in a federal framework with demogrants. The optimal income tax rate is shown to depend on a range of demographic and economic variables. Alternative models of fiscal federalism are proposed, and their implications for optimal commodity taxes and demogrants considered. Illustrative empirical evidence on Indian data confirms sensitivity of tax magnitudes to federal specification, and to assumptions about resource transfer between the federal and provincial authorities.

Suggested Citation

  • Ray, Ranjan, 1993. "Optimal Demogrants and Taxes in a Federal Welfare State," Journal of Population Economics, Springer;European Society for Population Economics, vol. 6(3), pages 199-214.
    • Handle: RePEc:spr:jopoec:v:6:y:1993:i:3:p:199-214
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    1. Pollak, Robert A & Wales, Terence J, 1981. "Demographic Variables in Demand Analysis," Econometrica, Econometric Society, vol. 49(6), pages 1533-1551, November.
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    3. Murty, M N & Ray, Ranjan, 1989. " A Computational Procedure for Calculating Optimal Commodity Taxes with Illustrative Evidence from Indian Budget Data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 91(4), pages 655-670.
    4. Roger H. Gordon, 1983. "An Optimal Taxation Approach to Fiscal Federalism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(4), pages 567-586.
    5. Tuomala, Matti, 1984. "On the optimal income taxation : Some further numerical results," Journal of Public Economics, Elsevier, vol. 23(3), pages 351-366, April.
    6. Ray, Ranjan, 1986. "Sensitivity of `optimal' commodity tax rates to alternative demand functional forms : An econometric case study of India," Journal of Public Economics, Elsevier, vol. 31(2), pages 253-268, November.
    7. Stern, N. H., 1976. "On the specification of models of optimum income taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 123-162.
    8. Slemrod, Joel, 1990. "Optimal Taxation and Optimal Tax Systems," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 157-178, Winter.
    9. Arnott, Richard & Grieson, Ronald E., 1981. "Optimal fiscal policy for a state or local government," Journal of Urban Economics, Elsevier, vol. 9(1), pages 23-48, January.
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