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The Comparison between Ad Valorem and Unit Taxes under Monopolistic Competition

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  • Philipp J. H. Schröder

Abstract

This paper shows that the welfare dominance of ad valorem over unit taxes under imperfect competition, extends to the Dixit-Stiglitz framework with differentiated products, entry and love of variety. This contrasts against findings by Anderson et al. (J Public Econ, 2001) made in a similar framework, but under Bertrand competition.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.40194.de/dp333.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 333.

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Length: 10 p.
Date of creation: 2003
Date of revision:
Handle: RePEc:diw:diwwpp:dp333

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Keywords: Unit tax; Specific tax; Ad valorem tax; Welfare;

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References

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  1. Anderson, S.P. & de Palma, A. & Kreider, B., 1999. "Tax incidece in Differentiated product Oligopoly," Papers 99-10, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
  2. Hamilton, Stephen F., 1999. "Tax incidence under oligopoly: a comparison of policy approaches," Journal of Public Economics, Elsevier, vol. 71(2), pages 233-245, February.
  3. Anderson, S.P. & de Palma, A. & Kreider, K., 1999. "The Efficiency of Indirect Taxes Under Imperfect Competition," Papers 99-09, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
  4. Skeath, Susan E. & Trandel, Gregory A., 1994. "A Pareto comparison of ad valorem and unit taxes in noncompetitive environments," Journal of Public Economics, Elsevier, vol. 53(1), pages 53-71, January.
  5. Michael Keen, 1998. "The balance between specific and ad valorem taxation," Fiscal Studies, Institute for Fiscal Studies, vol. 19(1), pages 1-37, February.
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Citations

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Cited by:
  1. Laszlo Goerke, 2011. "Commodity tax structure under uncertainty in a perfectly competitive market," Journal of Economics, Springer, vol. 103(3), pages 203-219, July.
  2. Henrik Vetter, 2013. "Consumption taxes in monopolistic competition: a comment," Journal of Economics, Springer, vol. 110(3), pages 287-295, November.
  3. Aiura, Hiroshi & Ogawa, Hikaru, 2013. "Unit tax versus ad valorem tax: A tax competition model with cross-border shopping," Journal of Public Economics, Elsevier, vol. 105(C), pages 30-38.
  4. Susanne Dröge & Philipp J. H. Schröder, 2005. "Corrective Ad Valorem and Unit Taxes: A Welfare Comparison," Discussion Papers of DIW Berlin 534, DIW Berlin, German Institute for Economic Research.
  5. Wang, Vey & Lai, Chung-Hui, 2010. "Franchise Fee, Tax/Subsidy Policies and Economic Growth," MPRA Paper 27745, University Library of Munich, Germany.
  6. Susanne Dröge & Philipp Schröder, 2009. "The welfare comparison of corrective ad valorem and unit taxes under monopolistic competition," International Tax and Public Finance, Springer, vol. 16(2), pages 164-175, April.
  7. 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).
  8. Lai, Chung-hui, 2013. "(In)determinacy, bargaining, and R&D policies in an economy with endogenous technological change," Economics Discussion Papers 2013-14, Kiel Institute for the World Economy.

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