The Size Distribution of Firms, Cournot, and Optimal Taxation
Tax laws and administrations often treat different size firms differently. There is, however, little research on the consequences. As modeled here, oligopolists with different efficiencies determine the size distribution of firms. A government that maximizes a weighted sum of consumer surplus, profits, and tax receipts can tax firms with different efficiencies differently and provides a reference point for other, more restricted differential tax systems. Taxes include a specific sales tax, an ad valorem sales tax, and a profits tax with imperfect deductibility of capital cost, and a combination of the last two. In general there is a pattern of tax rates by efficiency of firm. It is heavily dependent on the social valuation of tax receipts. Analytic and simulation results are provided. When both ad valorem taxes and the imperfect profits tax are combined, simulations suggest that the former rate is higher and the latter rate is lower for relatively inefficient firms.
|Date of creation:||01 Dec 2006|
|Date of revision:|
|Contact details of provider:|| Postal: International Monetary Fund, Washington, DC USA|
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mihir A. Desai & James R. Hines Jr., 2004.
"Market Reactions to Export Subsidies,"
NBER Working Papers
10233, National Bureau of Economic Research, Inc.
- Sofia Delipalla & Michael Keen, 1991.
"The Comparison Between Ad Valorem and Specific Taxation under Imperfect Competition,"
821, Queen's University, Department of Economics.
- 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.
- Lu�s M B Cabral & Jos� Mata, 2003.
"On the Evolution of the Firm Size Distribution: Facts and Theory,"
American Economic Review,
American Economic Association, vol. 93(4), pages 1075-1090, September.
- Cabral, Luís M B & Mata, José, 2001. "On the Evolution of the Firm Size Distribution: Facts and Theory," CEPR Discussion Papers 3045, C.E.P.R. Discussion Papers.
- Kanbur, S M, 1979. "Of Risk Taking and the Personal Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 769-97, August.
- Gareth Myles, 1996. "Imperfect competition and the optimal combination of ad valorem and specific taxation," International Tax and Public Finance, Springer, vol. 3(1), pages 29-44, January.
- Greg Shaffer & Stephen W. Salant, 1999. "Unequal Treatment of Identical Agents in Cournot Equilibrium," American Economic Review, American Economic Association, vol. 89(3), pages 585-604, June.
- Bergstrom, Theodore C. & Varian, Hal R., 1985. "Two remarks on Cournot equilibria," Economics Letters, Elsevier, vol. 19(1), pages 5-8.
- Leahy, Dermot & Montagna, Catia, 2001. "Strategic Trade Policy with Heterogeneous Costs," Bulletin of Economic Research, Wiley Blackwell, vol. 53(3), pages 177-82, July.
- Keen, Michael & Mintz, Jack, 2004. "The optimal threshold for a value-added tax," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 559-576, March.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:06/271. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.