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Unit versus ad valorem taxes: Monopoly in general equilibrium

  • Blackorby, Charles
  • Murty, Sushama

We show 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. This is contrary to all known claims.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 91 (2007)
Issue (Month): 3-4 (April)
Pages: 817-822

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Handle: RePEc:eee:pubeco:v:91:y:2007:i:3-4:p:817-822
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  1. 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.
  2. Silberberg, Eugene, 1972. "Duality and the Many Consumer's Surpluses," American Economic Review, American Economic Association, vol. 62(5), pages 942-52, December.
  3. Diewert, W. E. & Avriel, M. & Zang, I., 1981. "Nine kinds of quasiconcavity and concavity," Journal of Economic Theory, Elsevier, vol. 25(3), pages 397-420, December.
  4. 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.
  5. Ben Lockwood, 2004. "Competition in Unit vs. Ad Valorem Taxes," International Tax and Public Finance, Springer, vol. 11(6), pages 763-772, November.
  6. Blackorby, C. & Donaldson, D., 1995. "Market demand Curves and Dupuit-Marshall Consumer's Surpluses: A General Equilibrium Analysis," G.R.E.Q.A.M. 97a24, Universite Aix-Marseille III.
  7. Michael Keen, 1998. "The balance between specific and ad valorem taxation," Fiscal Studies, Institute for Fiscal Studies, vol. 19(1), pages 1-37, February.
  8. Guesnerie, Roger & Laffont, Jean-Jacques, 1978. "Taxing price makers," Journal of Economic Theory, Elsevier, vol. 19(2), pages 423-455, December.
  9. 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.
  10. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
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