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Unit Versus Ad Valorem Taxes : The Private Ownership of Monopoly In General Equilibrium

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  • Blackorby, Charles

    (Department of Economics,University of Warwick and GREQAM)

  • Murty, Sushama

    (Department of Economics, University ofWarwick)

Abstract

In an earlier paper [Blackorby and Murty; 2007] we showed that if a monopoly sector is imbedded in a general equilibrium framework and profits are taxed at one hundred percent, then unit (specific) taxation and ad valorem taxation are welfare-wise equivalent. In this paper, we consider private ownership of the monopoly sector. Given technical difficulties in making a direct general equilibrium comparison of unit and ad valorem taxation, we adopt a technique due to Guesnerie [1980] and Quinzii [1992] in a somewhat different context of increasing returns and non-convex economies to show that neither ad valorem taxation nor unit taxation Pareto dominates the other; although, generally, the two are not welfare-wise equivalent.

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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 797.

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Length: 40 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:wrk:warwec:797

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Keywords: Ad valorem taxes ; unit taxes ; monopoly;

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References

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  1. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, Octomber.
  2. Blackorby, Charles & Murty, Sushama, 2007. "Unit Versus Ad Valorem Taxes : The Private Ownership of Monopoly In General Equilibrium," The Warwick Economics Research Paper Series (TWERPS) 797, University of Warwick, Department of Economics.
  3. Delipalla, Sofia & Keen, Michael, 1992. "The comparison between ad valorem and specific taxation under imperfect competition," Journal of Public Economics, Elsevier, vol. 49(3), pages 351-367, December.
  4. Michael Keen, 1998. "The balance between specific and ad valorem taxation," Fiscal Studies, Institute for Fiscal Studies, vol. 19(1), pages 1-37, February.
  5. Blackorby, Charles & Murty, Sushama, 2006. "Unit Versus Ad Valorem Taxes : Monopoly In General Equilibrium," The Warwick Economics Research Paper Series (TWERPS) 761, University of Warwick, Department of Economics.
  6. Guesnerie Roger & Laffont Jean-jacques, 1978. "Taxing price makers," CEPREMAP Working Papers (Couverture Orange) 7806, CEPREMAP.
  7. 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.
  8. Ben Lockwood, 2004. "Competition in Unit vs. Ad Valorem Taxes," International Tax and Public Finance, Springer, vol. 11(6), pages 763-772, November.
  9. Blackorby, Charles & Diewert, W E, 1979. "Expenditure Functions, Local Duality, and Second Order Approximations," Econometrica, Econometric Society, vol. 47(3), pages 579-601, May.
  10. repec:cup:cbooks:9780898718966 is not listed on IDEAS
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Cited by:
  1. Charles Blackorby & Sushama Murty, 2010. "Unit Versus Ad Valorem Taxes: The Private Ownership of Monopoly In General Equilibrium," Discussion Papers 1011, Exeter University, Department of Economics.
  2. Laszlo Goerke, 2011. "Commodity Tax Structure under Uncertainty in a Perfectly Competitive Market," CESifo Working Paper Series 3339, CESifo Group Munich.

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