Unit Versus Ad Valorem Taxes : The Private Ownership of Monopoly In General Equilibrium
In an earlier paper [Blackorby and Murty; 2007] we showed 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. In this paper, we consider private ownership of the monopoly sector. Given technical difficulties in making a direct general equilibrium comparison of unit and ad valorem taxation, we adopt a technique due to Guesnerie  and Quinzii  in a somewhat different context of increasing returns and non-convex economies to show that neither ad valorem taxation nor unit taxation Pareto dominates the other; although, generally, the two are not welfare-wise equivalent.
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1011, Exeter University, Department of Economics.
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