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Taxes and quality: A market-level analysis

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  • James, Jennifer S.
  • Alston, Julian M.

Abstract

Aconventional assumption of product homogeneity when the commodity of interest is actually heterogeneous will lead to errors in an analysis of the incidence of policies, such as taxes. In this article, an equilibrium displacement model is used to derive analytical solutions for price, quantity, and quality effects of ad valorem and per unit taxes. The results show how parameters determine the effects of tax policies on quality. The potential for tax-induced distortions in quality, and the distributive consequences of those distortions, are illustrated in a case study of the market for Australian wine.

Suggested Citation

  • James, Jennifer S. & Alston, Julian M., 2002. "Taxes and quality: A market-level analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(3), pages 1-29.
    • Handle: RePEc:ags:aareaj:118623
    DOI: 10.22004/ag.econ.118623
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    2. Goodhue, Rachael E. & LaFrance, Jeffrey T. & Simon, Leo K., 2004. "We Should Drink No Wine Before Its Time," CUDARE Working Papers 25021, University of California, Berkeley, Department of Agricultural and Resource Economics.
    3. Preety Srivastava & Keith R. McLaren & Michael Wohlgenant & Xueyan Zhao, 2014. "Econometric Modelling of Price Response by Alcohol Types to Inform Alcohol Tax Policies," Monash Econometrics and Business Statistics Working Papers 5/14, Monash University, Department of Econometrics and Business Statistics.
    4. Timothy R. Davis & Fredoun Z. Ahmadi-Esfahani & Susana Iranzo, 2008. "Demand under product differentiation: an empirical analysis of the US wine market ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(4), pages 401-417, December.
    5. John M. Crespi & Stéphan Marette, 2003. "Are uniform assessments for generic advertising optimal if products are differentiated?," Agribusiness, John Wiley & Sons, Ltd., vol. 19(3), pages 367-377.
    6. Xueyan Zhao & Kym Anderson & Glyn Wittwer, 2019. "Who Gains from Australian Generic Wine Promotion and R&D?," World Scientific Book Chapters, in: Kym Anderson (ed.), The International Economics of Wine, chapter 9, pages 189-223, World Scientific Publishing Co. Pte. Ltd..
    7. Davis, Timothy R. & Ahmadi-Esfahani, Fredoun Z. & Iranzo, Susana, 2008. "Demand under product differentiation: an empirical analysis of the US wine market," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 1-17, December.
    8. Blum, Bianca, 2018. "Ausgestaltung einer Steuerpolitik zur Förderung von LED-Beleuchtung," The Constitutional Economics Network Working Papers 01-2018, University of Freiburg, Department of Economic Policy and Constitutional Economic Theory.
    9. Hart, Jarrett & Somerville, Scott & Sumner, Daniel A., 2022. "Brewery and Winery By-Product Markets: Environmental and Economic Benefits," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322322, Agricultural and Applied Economics Association.
    10. Sambucci, Olena & Sumner, Daniel A. & Goldstein, Robin, 2020. "Effect of taxes and costly regulations on the licensed and unlicensed cannabis markets," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304602, Agricultural and Applied Economics Association.
    11. Hübner, Julian, 2018. "Experimentelles Design zur Untersuchung der Auswirkungen von fiskalpolitischen Instrumenten auf nachhaltige Kaufentscheidungen im Leuchtmittelmarkt," The Constitutional Economics Network Working Papers 04-2018, University of Freiburg, Department of Economic Policy and Constitutional Economic Theory.
    12. Linde Götz & Ivan Djuric & Oleg Nivievskyi, 2016. "Regional Price Effects of Extreme Weather Events and Wheat Export Controls in Russia and Ukraine," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(3), pages 741-763, September.
    13. Fathi, Fatemeh & Bakhshoodeh, Mohammad, 2021. "Economic and environmental strategies against targeting energy subsidy in Iranian meat market: A game theory approach," Energy Policy, Elsevier, vol. 150(C).
    14. Maria Priscila Ramos & Sophie Drogué & Stephan Marette, 2006. "Welfare Measurement Biases and Product Differentiation in Agriculture: An Example from the US Beef Sector," Working Papers 2006/02, INRA, Economie Publique.
    15. Julian M. Alston & Davide Gaeta, 2021. "Reflections on the Political Economy of European Wine Appellations," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(2), pages 219-258, July.
    16. R. Morris Coats & Gary M. Pecquet & Leon Taylor, 2005. "The pricing of gasoline grades and the third law of demand," Microeconomics 0506006, University Library of Munich, Germany.

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