Consumption taxes in monopolistic competition: a comment
We show that an ad valorem tax is better than an equal-revenue unit tax when consumers spend some fixed proportion of income on taxed goods, when firms use constant mark-up pricing, and entry and exit drive per-firm profit to zero. These key assumptions implies that ad valorem taxes are superior in oligopoly as well as monopolistic competition, showing that earlier results on taxes in monopolistic competition (Schröder in J Econ 83(3):281–292, 2004 ) are not due to the mode of competition, but rather are due to the functional forms used. Copyright Springer-Verlag Wien 2013
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- Philipp J. H. Schröder, 2003.
"The Comparison between Ad Valorem and Unit Taxes under Monopolistic Competition,"
Discussion Papers of DIW Berlin
333, DIW Berlin, German Institute for Economic Research.
- Philipp J. H. Schröder, 2004. "The Comparison between Ad Valorem and Unit Taxes under Monopolistic Competition," Journal of Economics, Springer, vol. 83(3), pages 281-292, December.
- Leslie Reinhorn, 2012. "Optimal taxation with monopolistic competition," International Tax and Public Finance, Springer, vol. 19(2), pages 216-236, April.
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"Monopolistic Competition and Optimum Product Diversity,"
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American Economic Association, vol. 67(3), pages 297-308, June.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
- Delipalla, Sofia & Keen, Michael, 1992.
"The comparison between ad valorem and specific taxation under imperfect competition,"
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Elsevier, vol. 49(3), pages 351-367, December.
- Sofia Delipalla & Michael Keen, 1991. "The Comparison Between Ad Valorem and Specific Taxation under Imperfect Competition," Working Papers 821, Queen's University, Department of Economics.
- 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.
- Stephen F. Hamilton, 2009. "Excise Taxes with Multiproduct Transactions," American Economic Review, American Economic Association, vol. 99(1), pages 458-71, March.
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