DUAL ECONOMIC-GROWTH IN POOR TROPICAL AREAS

We consider a two-sector model, a 'modern' sector and an extensive one, with the extensive sector being highly dependent on natural vegetation cover as a factor of production. In the extensive sector, land tenure is not well defined. We show that taxing the extensive sector as a whole and land-intensive crops relative to labor-intensive crops increases real income. Consumption in the short-run, however, necessarily falls. The cost of the adjustment is paid mostly by the poor when the extensive sector as a whole is taxed. The distributional consequences of taxing the land intensive outputs, however, are ambiguous. © 1991.