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Tax Policy And Food Security: A Dynamic Analysis

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  • Gopalakrishnan, Pawan
  • Saha, Anuradha

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.

Suggested Citation

  • Gopalakrishnan, Pawan & Saha, Anuradha, 2021. "Tax Policy And Food Security: A Dynamic Analysis," Macroeconomic Dynamics, Cambridge University Press, vol. 25(3), pages 795-823, April.
    • Handle: RePEc:cup:macdyn:v:25:y:2021:i:3:p:795-823_11
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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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