Imperfect Competition And The Taxation Of Intermediate Goods
AbstractIt is an implication of the productive efficiency lemma of P. A. Diamond and J. A. Mirrlees that intermediate goods should not be taxed in a world of constant returns to scale and perfect competition. Three simple models are analyzed to examine whether this conclusion can be extended to accommodate imperfect competition. The importance of returns to scale and the form of the production function are emphasized and, where applicable, welfare-improving and optimal tax schemes are described that include taxes on intermediate goods. If all technologies are Leontief, productive efficiency remains desirable.
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Bibliographic InfoPaper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 315.
Length: 16 pages
Date of creation: 1989
Date of revision:
competition ; taxation ; intermediate goods ; efficiency;
Other versions of this item:
- Myles, Gareth D, 1989. "Imperfect Competition and the Taxation of Intermediate Goods," Public Finance = Finances publiques, , , vol. 44(1), pages 62-74.
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