Relative Efficiency of AD Valorem and Unit Taxes: The Case of Endogenous Quality
AbstractThis article studies the relative efficiency of unit and ad valorem taxes in a competitive market in which the quality of product is endogenous. The author finds that the relative efficiency of these two taxes depends on exactly how individuals value the quality of a product. Specifically, the unit tax welfare dominates the ad valorem tax in the “casket” case and the “full-price” case, whereas the ad valorem tax welfare dominates the unit tax in the “lightbulb” case.
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Bibliographic InfoArticle provided by in its journal Public Finance Review.
Volume (Year): 31 (2003)
Issue (Month): 3 (May)
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- Liu, Liqun, 2011. "The Alchian-Allen theorem and the law of relative demand: The case of multiple quality-differentiable brands," Mathematical Social Sciences, Elsevier, vol. 61(1), pages 52-57, January.
- Laszlo Goerke & Frederik Herzberg & Thorsten Upmann, 2012.
"Failure of Ad Valorem and Specific Tax Equivalence under Uncertainty,"
IAAEU Discussion Papers
201205, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
- Laszlo Goerke & Frederik Herzberg & Thorsten Upmann, 2012. "Failure of Ad Valorem and Specific Tax Equivalence under Uncertainty," CESifo Working Paper Series 3946, CESifo Group Munich.
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