OPTIMAL TRADE TAXES ON AGRICULTURE IN DEVELOPING-COUNTRIES

Adopts a strategy offering a compromise between the methods of optimal tax theory and tax reform analysis, to ascertain the optimal tax on two types of good, an aggregate modern sector or imported non-food consumption good, and a non-food export crop. The model is applied to the example of Ghana, with particular consideration given to cereal pricing policy and subsidies. The conclusion stresses the important distributional effects of the wider repercussions of price changes induced by trade tax changes, and the means by which they may be taken into account when designing trade taxes. -P.Hardiman