Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248753 
Year of Publication: 
2021
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2021-069/VI
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
The Atkinson-Stiglitz theorem on uniform consumption taxation breaks down if prices are endogenous. This paper investigates the implications for optimal food subsidies in China. To do so, we build a general equilibrium model where low-skilled workers have a comparative advantage in the production of food. Food subsidies raise the relative demand for low-skilled workers, which reduces the skill premium and indirectly redistributes income from high-skilled to low-skilled workers. We calibrate our model to match key moments from the Chinese economy, including sectoral production and spending patterns that we obtain from micro-level survey data. Our results suggest that general equilibrium effects rationalize food subsidies in the range 5%-12%.
Subjects: 
uniform consumption taxes
general equilibrium effects
food subsidies
JEL: 
E64
H21
Q18
Document Type: 
Working Paper

Files in This Item:
File
Size
700.6 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.