Farm household decisions under various tax policies : Comparative static results and evidence from household data

The study is devoted to the comparative static analysis and econometric estimation of farm household decisions under both standard and agricultural taxes. Accounting for labor market constraints a non-separable model is constructed implying  increasing per-unit costs of accessing  labor markets.To control for tax-induced  adjustments related to labor market imperfections we compare the results to those derived from a separable approach, assuming perfect labor markets. Theoretical  results suggest that most tax-induced responses are ambivalent mainly caused by  shadow  prices effects. Further, tax-induced effects differ between the two model versions. In particular standard taxes may imply production adjustments in the case of non-separability. Thus, income and value-added taxes are no more necessarily superior to agricultural taxes. Econometric analysis using individual  household data from Mid-West Poland indicates remarkable responses to market surplus and input taxes. In contrast, standard and land taxes imply only negligible production adjustments.Thus, they seem to be superior, at least in the Polish case.

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