Parametric and Non-Parametric Approaches to Price and Tax Reform

27 Pages Posted: 24 Sep 1996 Last revised: 1 Oct 2010

See all articles by Angus Deaton

Angus Deaton

Princeton University; National Bureau of Economic Research (NBER)

Serena Ng

Columbia Business School - Economics Department

Date Written: May 1996

Abstract

In the analysis of tax reform, when equity is traded off against efficiency, the measurement of the latter requires us to know how tax- induced price changes affect quantities supplied and demanded. In this paper, we present various econometric procedures for estimating how taxes affect demand. We examine advantages and disadvantages of parametric methods of tax reform analysis and suggest that the nonparametric `average derivate estimator' is a useful alternative. We apply both parametric and nonparametric methods to analyze possible price reform for foods in rural Pakistan, and discuss the issues that remain to be dealt with in empirical welfare analyses.

Suggested Citation

Deaton, Angus S. and Ng, Serena, Parametric and Non-Parametric Approaches to Price and Tax Reform (May 1996). NBER Working Paper No. w5564, Available at SSRN: https://ssrn.com/abstract=4242

Angus S. Deaton (Contact Author)

Princeton University ( email )

Woodrow Wilson School
Princeton, NJ 08544
United States
609-258-5967 (Phone)
609-258-5974 (Fax)

HOME PAGE: http://www.wws.princeton.edu/~deaton

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Serena Ng

Columbia Business School - Economics Department ( email )

420 West 118th Street
New York, NY 10027
United States

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