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Unit Versus Ad Valorem Taxes : Monopoly In General Equilibrium

  • Blackorby, Charles

    (Department of Economics, University of Warwick and GREQAM)

  • Murty, Sushama

    (Department of Economics, University of Warwick)

We show that if a monopoly sector is imbedded in a general equilibrium framework and profits are taxed at one hundred percent, then unit (specific) taxation and ad valorem taxation are welfare-wise equivalent. This is contrary to all known claims.

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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 761.

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Length: 18 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:wrk:warwec:761
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  1. Diewert, W. E. & Avriel, M. & Zang, I., 1981. "Nine kinds of quasiconcavity and concavity," Journal of Economic Theory, Elsevier, vol. 25(3), pages 397-420, December.
  2. Silberberg, Eugene, 1972. "Duality and the Many Consumer's Surpluses," American Economic Review, American Economic Association, vol. 62(5), pages 942-52, December.
  3. Ben Lockwood, 2004. "Competition in Unit vs. Ad Valorem Taxes," International Tax and Public Finance, Springer, vol. 11(6), pages 763-772, November.
  4. 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.
  5. Blackorby, Charles & Donaldson, David, 1999. "Market demand curves and Dupuit-Marshall consumers' surpluses: a general equilibrium analysis," Mathematical Social Sciences, Elsevier, vol. 37(2), pages 139-163, March.
  6. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Blackorby, Charles & Murty, Sushama, 2007. "Unit versus ad valorem taxes: Monopoly in general equilibrium," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 817-822, April.
  8. Michael Keen, 1998. "The balance between specific and ad valorem taxation," Fiscal Studies, Institute for Fiscal Studies, vol. 19(1), pages 1-37, February.
  9. Guesnerie, Roger & Laffont, Jean-Jacques, 1978. "Taxing price makers," Journal of Economic Theory, Elsevier, vol. 19(2), pages 423-455, December.
  10. 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.
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