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The Comparison between Ad Valorem and Unit Taxes under Monopolistic Competition

  • Philipp J. H. Schröder

This paper shows that the welfare dominance of ad valorem over unit taxes under imperfect competition, extends to the Dixit-Stiglitz framework with differentiated products, entry and love of variety. This contrasts against findings by Anderson et al. (J Public Econ, 2001) made in a similar framework, but under Bertrand competition.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 333.

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Length: 10 p.
Date of creation: 2003
Date of revision:
Handle: RePEc:diw:diwwpp:dp333
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  1. Anderson, Simon & de Palma, Andre & Kreider, Brent, 2001. "The Efficiency of Indirect Taxes Under Imperfect Competition," Staff General Research Papers 5203, Iowa State University, Department of Economics.
  2. 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.
  3. Anderson, Simon & de Palma, Andre & Kreider, Brent, 2001. "Tax Incidence in Differentiated Product Oligopoly," Staff General Research Papers 5202, Iowa State University, Department of Economics.
  4. Hamilton, Stephen F., 1999. "Tax incidence under oligopoly: a comparison of policy approaches," Journal of Public Economics, Elsevier, vol. 71(2), pages 233-245, February.
  5. Michael Keen, 1998. "The balance between specific and ad valorem taxation," Fiscal Studies, Institute for Fiscal Studies, vol. 19(1), pages 1-37, February.
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