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Welfare impact of broadening VAT by exempting local food markets: The case of Bangladesh
Örebro University, Örebro University School of Business.ORCID iD: 0000-0003-4078-7349
Örebro University, Örebro University School of Business.
2014 (English)Licentiate thesis, comprehensive summary (Other academic)
Abstract [en]

The spread of value-added tax (VAT) in developing countries has been dramatic since the beginning of 1990’s. Adopted by more than 130 countries, including many of the poorest, VAT has been, and remains, the key of tax reform in many developing countries. While adopting VAT, there are arguments for and against uniform general VAT system. A uniform and general VAT on all commodities is considered to be efficient and less distortionary. On the other hand, from the distributional perspective many goods especially food is exempted from VAT as low income households spend a high share of income on food. The contribution of this study is to analyze the income distribution and welfare impact of VAT reform when the food sectors are divided into local markets and supermarkets. A Computable General Equilibrium (CGE) model is used to evaluate the consequences of VAT reforms for Bangladesh. Our simulation results show that, a VAT reform that exempts the agriculture sector and local market food commodities provides the best welfare and distributional impact.

Place, publisher, year, edition, pages
Örebro: Örebro universitet , 2014. , 58 p.
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:oru:diva-41645OAI: oai:DiVA.org:oru-41645DiVA: diva2:780771
Presentation
2014-12-19, 13:15 (English)
Opponent
Supervisors
Available from: 2015-04-10 Created: 2015-01-15 Last updated: 2017-11-01Bibliographically approved
In thesis
1. Child Marriage, Human Development and Welfare: Using Public Spending, Taxation and Conditional Cash Transfers as Policy Instruments
Open this publication in new window or tab >>Child Marriage, Human Development and Welfare: Using Public Spending, Taxation and Conditional Cash Transfers as Policy Instruments
2016 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The theme of this thesis is to analyze the impact of policy interventions such as financing human development (HD), tax reform and conditional cash transfer programmes, under the framework of growth and sustainable development. These policy instruments are evaluated through the application of both partial and general equilibrium models, and the last paper concentrates on developing regional social accounting matrices (SAMs) as a core database for spatial general equilibrium modelling.

Essay 1: Trade-offs in Achieving Human Development Goals for Bangladesh investigates the benefits and costs associated with alternative investment financing options for achieving HD goals by applying the MAMS (Maquette for Millennium Development Goals Studies) model. We find that full achievement of these goals would have led to a GDP loss that would have been significantly larger in the domestic borrowing scenario than in the tax scenario. The tax-financing alternative is thus the better option for financing large development programs. In terms of public spending composition, we find that, under some circumstances, a trade-off arises between overall Millennium Development Goal (MDG) progress and poverty reduction.

Essay 2: Welfare impact of broadening VAT by exempting Small-Scale food markets: The case of Bangladesh analyses the welfare impacts of different VAT reforms. A general and uniform VAT on all commodities is preferred as it is more efficient and less administratively costly. However, due to equity concerns, food is normally exempted from VAT. On the other hand, exemptions on food mean that an implicit subsidy is provided to high-income households. Hence, we analyze a broad-based VAT regime with a high threshold that excludes small-scale operators (where the low-income households buy their products most, including food) and the simulation result shows that welfare improves for the low-income households.

Essay 3: Effect of Girls’ Secondary School Stipend on Completed Schooling and Age at Marriage: Evidence from Bangladesh estimates the effect of a conditional cash transfer programme on education and age at marriage. We apply both difference in differences (DiD) and regression discontinuity methods to evaluate the impact of the policy instrument. Our estimation results show that the girls in the treatment group who were exposed to the programme had a higher average number of completed years of schooling and also delayed their first marriage compared to the girls in the control group. We also show that the DiD approach might produce a biased result as it does not consider the convergence effect.

Essay 4: Estimation of Multiregional Social Accounting Matrices using Transport Data proposes a methodology for estimating multiregional SAMs from a national SAM by applying the cross-entropy method. The methodology makes possible the construction of regional SAMs that are consistent with official regional accounts and minimize deviations from transport data.

Place, publisher, year, edition, pages
Örebro: Örebro university, 2016. 24 p.
Series
Örebro Studies in Economics, ISSN 1651-8896 ; 31
Keyword
HDs, Growth, MAMS, VAT Reform, Equity, Welfare, Secondary Stipend, Education, Age at Marriage, Multiregional Social Accounting Matrix, Cross-Entropy Estimation
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:oru:diva-47122 (URN)978-91-7529-110-9 (ISBN)
Public defence
2016-02-19, Prismahuset, Hörsal 1, Örebro universitet, Fakultetsgatan 1, Örebro, 10:15 (English)
Opponent
Supervisors
Available from: 2015-12-18 Created: 2015-12-18 Last updated: 2017-10-17Bibliographically approved

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CiteExportLink to record
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Citation style
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