Poverty-reducing commodity tax reforms

Abstract

Following Ahmad and Stern (1984) a number of papers have been devoted to the analysis and the application of revenue-neutral and welfare-enhancing marginal commodity tax reforms. A recent stream of literature has investigated poverty-reducing commodity tax reforms using specific poverty measures. Here we derive the conditions under which a revenue-neutral marginal commodity tax reform increases the mean income of the poor and generates Lorenz-dominance of post-tax with respect to pre-tax distribution of equivalent income among the poor. These conditions are easy to interpret and not particularly difficult to apply.

Citation

Santoro, A. (2007), "Poverty-reducing commodity tax reforms", Bishop, J. and Amiel, Y. (Ed.) Inequality and Poverty (Research on Economic Inequality, Vol. 14), Emerald Group Publishing Limited, Leeds, pp. 301-316. https://doi.org/10.1016/S1049-2585(06)14014-4