Distributional consequences of rural food levy
and subsidized urban rations
Raaj Kumar Sah and T. N. Srinivasan
European Economic Review, Volume 32, Number 1, January 1988, pages 141-159.
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Governments in many developing countries have imposed food levies on farmers to provide subsidized food to urban consumers. The resulting price discrimination between individuals has general equilibrium effects, so that the welfare consequences of such a policy for different socio-economic groups have been controversial. We relate the distributional consequences to the parameters of the economy and identify systematic relationships among different partitions of the outcomes. We show, for instance, that if the policy helps (hurts) richer city-dwellers, then it hurts (helps) poorer farmers.