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Stretching the Inelastic Rubber: Taxation, Welfare and Lobbies in Amazonia, 1870-1910

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  • Felipe Tâmega Fernandes

    () (Harvard Business School, Entrepreneurial Management Unit)

Abstract

This paper examines the effect of government intervention via taxation on domestic welfare. A case-study of Brazilian market power on rubber markets during the boom years of 1870-1910 shows that the government generated 1.3% of GDP through an export tax on rubber but that it could have generated 4.7% in total, had the government set the tariff at the optimal level. National, regional and local constraints prevented the government from maximizing regional welfare. In a context of lobbies, government budget maximization may have differed from regional welfare maximization.

Suggested Citation

  • Felipe Tâmega Fernandes, 2009. "Stretching the Inelastic Rubber: Taxation, Welfare and Lobbies in Amazonia, 1870-1910," Harvard Business School Working Papers 10-032, Harvard Business School.
  • Handle: RePEc:hbs:wpaper:10-032
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    Keywords

    Rubber; Commodities; Market Power; Optimal Tariff; Welfare; Trade and Brazil.;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L73 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Forest Products
    • N76 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Latin America; Caribbean

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