Estimation of elasticities and optimal taxes on the most consumed goods in Mexico

  • Jorge N. Valero Gil Universidad Autónoma de Nuevo León
Keywords: food elasticities, optimal taxation, consumer economics, urban-rural analysis, agricultural markets
JEL Classification: C31, D12, H15, O1, O54, Q13


We estimate cross and direct elasticities for food products in Mexico. We consider Mexico’s most consumed goods, which are tortillas, meat, chicken, milk, eggs, onion, chili pepper, kidney beans, soft drinks and water. We find that using the methodology of Deaton to estimate elasticities creates difficulties when applying it to rural zones and cross-elasticities. We further use the estimated elasticities to find the optimal taxes for these products, to evaluate whether an optimal tax reform would call for greater consumer taxes or subsidies.


Ahmad, Ehtisham y N. Stern (1984). The Theory of Reform and Indian Indirect Taxes, Journal of Public Economics, 25, 259-298.

Aportela, Fernando y A. Werner (2002). La reforma al impuesto al valor agregado de 1995: efecto inflacionario, incidencia y elasticidades relativas, Documento de Investigación, núm. 2002-01, Banco de México.

Atkinson, A. B. (1970). On the measurement of inequality, Journal of Economic Theory, vol.2.

Banks, James, Richard Blundell y Arthur Lewbel (1997). Quadratic Engel Curves and Consumer Demand, The Review of Economics and Statistics, 79(4), pp. 527-539.

Blundell, Richard y Alan Duncan (1998). Kernel Regression en Empirical Microeconomics, The Journal of Human Resources, 33(1), pp. 62-87.

Campos, Raymundo M. (2002). Impacto de una reforma fiscal en México. Una estimación con base en sistemas de demanda, tesis de maestría, CEE, El Colegio de México.

Comité Técnico para la Medición de la Pobreza (2002). Medición de la pobreza. Variantes metodológicas y estimación preliminar, DI, 1, SEDESOL, México.

Deaton, A. (1997). The analysis of household surveys: A microeconometric approach to development policy, The World Bank, The Johns Hopkins University Press.

Deaton, A. (1990). Price Elasticities from Survey Data. Extensions and Indonesian Results, Journal of Econometrics, 44, 281-309.

Deaton, A. (1988). Quality, Quantity, and Spatial Variation of Price, The American Economic Review, 78(3), 418-430.

Deaton, A. (1981). Optimal Taxes and the Structure of Preferences, Econometrica, 49(5), 1245-1260.

Deaton, A. y J. Muellbauer (1980). An Almost Ideal Demand System, The American Economic Review, 70(3), 312-326.

Engel, Charles y John H. Rogers (2001). Violating the Law of One Price: Should We Make a Federal Case Out of It?, Journal of Money, Credit and Banking, 33 (1), 1-15.

Feldstein, M. S. (1972). Distributional Equity and the Optimal Structure of Public Prices, The American Economic Review, 62(1), 32-36.

INEGI (2003). Encuesta nacional de ingresos y gastos de los hogares 2002, México.

King, Mervyn A. (1983). Welfare Analysis of Tax Reforms Using Household Data, Journal of Public Economics, 21(2), pp. 183-214.

Layson, Stephen (1994). Market Opening under Third-Degree Price Discrimination, The Journal of Industrial Economics, 42(3), 335-340.

Nicita, Alessandro (2004). Efficiency and Equity of a Marginal Tax Reform: Income, Quality and Price Elasticities for Mexico, World Bank Policy Research Working Paper, 3266.

OECD (2004). Producer and Consumer Support Estimates. OECD Data base, 1986-2003. Users guide.

Park, William (1985). Pricing Milk in Ecuador: The Impact of Transport Costs, Food Policy, 10(4), 374-377.

Schmalensee, Richard (1981). Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination, The American Economic Review, 71(1), 242-247.

Urzúa, Carlos (2005). The Ahmad-Stern Approach Revisited, Economics Bulletin, vol. 8, núm. 4, 1-8.

Urzúa, Carlos (2001). Welfare Consequences of a Recent Reform in Mexico, Estudios Económicos, 16, 57-72.

Valero Gol, J. N. (2002). La distribución de los bienes en México, Problemas del Desarrollo, 33(129).

How to Cite
Valero GilJ. (2006). Estimation of elasticities and optimal taxes on the most consumed goods in Mexico. Estudios Económicos, 21(2), 127-176.
  • Abstract viewed - 384 times
  • PDF (Spanish) downloaded: 144 times