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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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    2. 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.
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