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Welfare effects of taxation in oligopolistic markets
Stockholm University, Faculty of Social Sciences, Department of Economics.
Stockholm University, Faculty of Social Sciences, Department of Economics.
Number of Authors: 2
2016 (English)In: Journal of Economic Theory, ISSN 0022-0531, E-ISSN 1095-7235, Vol. 163, 141-166 p.Article in journal (Refereed) Published
Abstract [en]

This paper discusses how marginal costs of public funds are related to various market characteristics under imperfect competition. Under a quite general tax scheme, these costs turn out to be lower the wider the firms' product ranges, the lower the degree of market concentration and the lower the degree of product differentiation. Moreover, marginal costs of taxation are lower in Bertrand markets compared to Cournot markets. In cases when marginal costs of public funds cannot easily be assessed we ask if pass-through rates can provide useful information for policy makers. The market characteristics that we analyze are shown to have opposite effects on pass-through and marginal costs of public funds. It is also demonstrated that the marginal cost of public funds is generally lower for ad valorem taxes than for unit taxes. The main results are based on a linear demand system, but a number of extensions confirm that our main results are reasonably robust.

Place, publisher, year, edition, pages
2016. Vol. 163, 141-166 p.
Keyword [en]
Welfare, Taxation, Imperfect competition
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:su:diva-131216DOI: 10.1016/j.jet.2016.01.007ISI: 000375812600005OAI: oai:DiVA.org:su-131216DiVA: diva2:936742
Available from: 2016-06-14 Created: 2016-06-14 Last updated: 2016-06-14Bibliographically approved

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Häckner, JonasHerzing, Mathias
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