How much redistribution is possible through
Raaj Kumar Sah
Journal of Public Economics, Volume 20, Number 1, February 1983, pages 89-101.
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This paper aims to quantify the redistribution which can be attained as the outcome of indirect taxation. This question is of crucial relevance to many countries which are constrained to depend primarily on indirect taxes. I assess the maximum possible redistribution by imposing the most redistributive indirect taxation. The public budget is balanced, and the real income gain to the worst-off is taken as the metric of redistribution. Ceilings on this metric are first obtained within a general set-up, and then in a number of specific models. The resulting redistribution is found to be meager. As this is the outcome of the most redistributive taxation, redistribution from any real-world indirect taxation will be even smaller.