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Taxation, Industry Integration and Production Efficiency

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  • Simone Moriconi

Abstract

Taxes levied on production processes (e.g. VAT), are today a very important source of government revenues in developed economies. Theories of optimal taxation conclude that these taxes are detrimental to production efficiency, when firms operate in perfectly competitive markets. These theories draw on the neoclassical approach, which regards firms as single production units. The present paper investigates the effects of taxation on production efficiency, accounting for the organization of an industry. The model shows that a lump-sum tax does not have any effect on the organization of the industry, while a non lump-sum tax can be designed that induces an organizational change of the industry. The paper shows that the effect of this ”tax induced organizational change” on production efficiency ultimately depends on the characteristics of the market.

Suggested Citation

  • Simone Moriconi, 2016. "Taxation, Industry Integration and Production Efficiency," CESifo Working Paper Series 6001, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_6001
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    Cited by:

    1. Elenka Brenna & Lara Gitto, 2016. "Financing elderly care in Italy and Europe. Is there a common vision?," DISCE - Working Papers del Dipartimento di Economia e Finanza def047, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    2. repec:bpj:bejeap:v:17:y:2017:i:3:p:20:n:6 is not listed on IDEAS
    3. Rosario Crino & Giovanni Immordino & Gülen Karakoç-Palminteri & Salvatore Piccolo, 2018. "Fighting Mobile Crime," CSEF Working Papers 504, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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    More about this item

    Keywords

    taxation; organizational change; vertical integration; production efficiency;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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