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A theoretical framework for determining the appropriate level of subsidy in an economy

Author

Listed:
  • Augustine A. Osagiede
  • Virtue U. Ekhosuehi

Abstract

A framework has been developed for determining the subsidy that, in the long run, serves to equalize the per capita income shares across income classes. The framework characterizes the income dynamics by the Markov process and uses the principle of maximum entropy for selecting among alternative subsidy schemes. The study provides a means to forecast the per capita income shares at any instant of time and serves as an objective tool to decide on the appropriate level of subsidy.

Suggested Citation

  • Augustine A. Osagiede & Virtue U. Ekhosuehi, 2015. "A theoretical framework for determining the appropriate level of subsidy in an economy," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 25(2), pages 19-34.
    • Handle: RePEc:wut:journl:v:2:y:2015:p:19-34:id:1130
    DOI: 10.5277/ord150202
    as

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    References listed on IDEAS

    as
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    6. Boadway, Robin W & Wildasin, David E, 1990. "Optimal Tax-Subsidy Policies for Industrial Adjustment to Uncertain Shocks," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 105-134, January.
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