Discussion Papers in Economics

Planning Unit, Indian Statistical Institute, Delhi

#02-09:

Reforming Food Subsidy Schemes: Estimating the Gains from Self-Targeting in India :
Bhaskar Dutta and Bharat Ramaswami

Abstract

Abstract This paper uses the theoretical framework of the theory of tax reform to analyse whether a "small" change in an existing food subsidy program can be welfare-improving and revenue-neutral. It shows how existing econometric methods can be adapted to estimate demand parameters even when household level data exhibit little price variation because the government controls food prices. The methodology developed here is used to estimate welfare changes from shifting a rupee of subsidy on existing commodities to coarse cereals in the Indian public distribution system. JEL Classification: H23, Q18

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