Peasants versus City-Dwellers Taxation and

In this book Nobel Laureate Joseph Stiglitz and co-author Raaj Sah address one of development's major issues. Most of today's countries face town versus country tensions of increasing severity, including such issues as who should pay how much in taxes, who should get how much in subsidies, and what forms the taxes and subsidies should take. This volume analyses these tensions and issues, taking into account the great diversity of institutions and economic environments observed in different developing countries.

Raaj K. Sah is Professor of Public Policy, University of Chicago. Joseph E. Stiglitz is Professor of Finance and Economics, Columbia University. He was awarded the Nobel Prize in Economics in 2001.

PART I: AN INTRODUCTION TO ISSUES AND METHODOLOGY

Introduction

3

(12)

Normative versus Positive Analysis

4

(1)

Analysis under Limited Data Availability

5

(1)

Policy and Political Economy

6

(1)

General-Equilibrium Analysis

7

(1)

The Structure of the Book

8

(2)

The Nature of the Results

10

(2)

Some Remarks on the Role of Theory

12

(3)

The Objectives And Instruments Of Government Policy And The Structure Of The Economy in LDCs

15

(12)

Stated Objectives of Food-Related Policies

15

(2)

Putting Agricultural Policies in Perspective

17

(4)

Other Policy Instruments

17

(1)

Limitations on Government Policy

18

(2)

Equivalence of Different Policies

20

(1)

The Economic Structure of LDCs

21

(5)

The Importance of Agriculture and the Dual Economy

21

(1)

Market Imperfections

22

(1)

The Rural Sector

23

(1)

Investible Surplus, Private Investment, and Government Consumption

24

(1)

Openness of the Economy

25

(1)

Concluding Remarks

26

(1)

An Approach To Applied Welfare Economics

27

(12)

Introduction

27

(1)

Theoretical Background

27

(3)

General-Equilibrium Analysis

27

(1)

Pigouvian Welfare Economics and Optimal Taxation

28

(1)

The New Welfare Economics

29

(1)

New New Welfare Economics

29

(1)

Applied Welfare Economics for LDCs

30

(9)

Limited Taxation

30

(3)

General-Equilibrium Effects

33

(1)

Institutions

33

(1)

Inter-Personal Welfare Comparisons

34

(5)

PART II: INTER-SECTORAL TAXATION POLICIES

Rural-Urban Prices In Open Economies

39

(20)

Introduction

39

(3)

A Simple Model

42

(3)

Agricultural Sector

42

(1)

Industrial Sector

43

(1)

Investible Surplus

44

(1)

Analysis of Changes in Agricultural and Industrial Prices

45

(10)

Pareto-Improving Price Reforms

45

(3)

Welfare-Enhancing Price Reforms

48

(2)

Egalitarian Price Reforms

50

(2)

Optimal Prices

52

(1)

Implicit Tax-Rate

53

(1)

Reform Analysis versus Optimal Pricing

54

(1)

Price-Productivity Effects

55

(4)

Appendix

57

(1)

Agricultural Sector

57

(1)

Industrial Sector

58

(1)

Investible Surplus

58

(1)

The Price Scissors In Open Economies

59

(6)

Introduction

59

(1)

Effects on the Investible Surplus of Changes in the Price Scissors

60

(2)

Welfare Effects of Changing the Price Scissors

62

(1)

Optimal Price Scissors

63

(1)

Concluding Remarks

64

(1)

The Price Scissors in Closed And Partially Closed Socialist Economies

65

(18)

Introduction

65

(1)

The Model

66

(7)

The Adjustment of Wages in Response to Price Changes

67

(1)

The Effect on Individuals' Welfare

68

(1)

The Effect on Productivity

69

(2)

The Effect on the Investible Surplus

71

(1)

The Consequences of a Higher Price Elasticity of the Agricultural Surplus

72

(1)

Reform in the Price Scissors

73

(2)

Optimal Price Scissors

75

(4)

An Interpretation in Terms of the Tax-or Subsidy-Rate

75

(3)

Alternative Characterizations

78

(1)

Economies with Traded and Non-Traded Goods

79

(2)

Concluding Remarks

81

(2)

Appendix

82

(1)

The Soviet Industrialization Debate and Collectivization

83

(12)

Introduction

83

(1)

Preobrazhensky's Propositions

84

(3)

First Proposition

85

(1)

Second Proposition

86

(1)

The Fundamental Law of Primitive Socialist Accumulation

87

(1)

The Correct Size of the Price Scissors

87

(1)

Collectivization

88

(1)

A Postscript on the Soviet Debate

89

(6)

PART III: THE RURAL SECTOR

Income Distribution And Alternative Organizational Forms Within The Rural Sector

95

(15)

Introduction

95

(1)

Distributional Effects

96

(7)

Elasticity of the Rural Wage

98

(1)

Normative Analysis

99

(3)

Non-Taxable Goods

102

(1)

Alternative Forms of Rural Organization

103

(3)

Extended-Family Farming

103

(1)

Share-Cropping

104

(2)

Effects of Wages and Prices on Rural Productivity

106

(2)

Plantations

106

(2)

Selectivity in Employment

108

(1)

Concluding Remarks

108

(2)

Taxes and Subsidies on Different Goods in the Rural Sector

110

(17)

Introduction

110

(2)

A General Formulation

112

(2)

Informationally Parsimonious Pareto-Improving Price Reforms for Cash-Crops and Manufactured Inputs

114

(4)

Should Some Cash-Crops or Manufactured Inputs be Taxed and Others Subsidized?

118

(1)

Some Caveats

119

(8)

Market Imperfection

119

(1)

Technological Change

120

(1)

Appendix

121

(6)

PART IV: THE URBAN SECTOR

The Impact Of Urban Wage And Employment Determination On Taxation Policies

127

(18)

Introduction

127

(2)

A General Formulation of Urban Wage-Determination

129

(2)

Three Special Cases

130

(1)

The Effects on Taxation Analysis

131

(1)

Urban--Rural Prices with an Endogenous Urban Wage

131

(4)

Optimal Prices

134

(1)

Price Scissors with Endogenous Wages

135

(2)

Optimal Price Scissors

136

(1)

Endogenous Urban Wage versus Government-Controlled Urban Wage: Which is the Appropriate Assumption for LDCs?

137

(2)

Note on the Urban Wage Fixed in Terms of the Utility Level

139

(1)

Urban Unemployment

140

(5)

A General Formulation

140

(3)

The Consequences of Tax-Induced Effects on Urban Unemployment

143

(2)

Some Aspects of the Wage-Productivity Hypothesis That Are Relevant For Taxation Analysis

145

(11)

Introduction

145

(2)

Why Do Wages and Prices Affect Productivity?

147

(3)

A Model of Wages, Prices, Productivity, and Unemployment

150

(6)

Special Cases

152

(1)

A More General Model

153

(1)

An Aspect of Taxation Analysis

154

(2)

Taxes and Subsidies On Different Goods In The Urban Sector

156

(9)

Introduction

156

(2)

A General Formulation

158

(4)

Productivity Effects

158

(1)

Characterization of the Optimum

159

(1)

Ramsey Case

160

(1)

Urban Wages Fixed in Terms of the Utility Level

160

(1)

Unemployment Effects

161

(1)

Generalizations

162

(3)

Variable Hours of Work in the Urban Sector

162

(1)

Heterogeneity within the Urban Sector

163

(1)

Appendix

164

(1)

Tax Policy In The Presence Of Migration And Urban Unemployment

165

(16)

Introduction

165

(1)

The General Migration Relationship

166

(4)

The Generalized Harris--Todaro Hypothesis

167

(1)

The Opportunity Cost of Urban Unemployment

168

(2)

Rural--Urban Prices

170

(6)

Rural Prices

171

(2)

The Harris--Todaro Migration Hypothesis

173

(1)

Urban Prices

173

(2)

Related Issues

175

(1)

Pareto-Efficient Urban Taxes on Different Goods

176

(2)

Concluding Remarks

178

(3)

Appendix

179

(2)

Taxation In The Urban Sector: Some Aspects Of The Underlying Model

181

(11)

Introduction

181

(1)

A General Model of the Urban Sector

182

(4)

The Analysis of Taxation

184

(2)

Inefficiency of Market Equilibrium

186

(1)

Interdependence of Demand and Supply of Urban Labour

187

(4)

Effects of Price Changes

191

(1)

Concluding Remarks

191

(1)

The Social Cost of Labour

192

(11)

Introduction

192

(1)

The Model

193

(4)

The Shadow Wage

194

(2)

Interpretation of the Shadow Wage

196

(1)

Special Cases

197

(4)

Migration Equals Employment Creation

198

(1)

Endogenous Migration: The Harris--Todaro Migration Hypothesis

199

(2)

Concluding Remarks

201

(2)

Concluding Remarks

203

(6)

Some Key Issues

203

(4)

Political Economy Considerations

207

(1)

The Policy Predicament

208

(1)

References

209

(8)

Index

217

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Peasants versus City-Dwellers Taxation and the Burden of Economic Development

Summary

Author Biography

Table of Contents

Supplemental Materials

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Peasants versus City-Dwellers Taxation and the Burden of Economic Development

Summary

Author Biography

Table of Contents

Supplemental Materials

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