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Managerial Firms, Taxation, and Welfare

Author

Listed:
  • Tuna Abay
  • Simone Moriconi

Abstract

This paper investigates welfare properties of an economy where firms are managerial, i.e., composed of two complementary units, each run by its own manager. We show that welfare outcomes depend on the interplay between the set of private costs and benefits that are associated with the coordination of operating decisions inside the firm. We also derive a number of interesting results regarding the welfare effects of taxation, which depend on market conditions, tax levels, and structure of managerial incentives. In some cases, these welfare effects are due to "tax-induced" changes in the ownership structure of firms in the industry equilibrium.

Suggested Citation

  • Tuna Abay & Simone Moriconi, 2023. "Managerial Firms, Taxation, and Welfare," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 179(2), pages 340-380.
    • Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2023-0030
    DOI: 10.1628/jite-2023-0030
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    References listed on IDEAS

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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.
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    More about this item

    Keywords

    managerial firms; welfare; taxation;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D60 - Microeconomics - - Welfare Economics - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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