Unit versus ad valorem taxes : the private ownership of monopoly in general equilibrium
Murty, Sushama and Blackorby, Charles, 1937- (2007) Unit versus ad valorem taxes : the private ownership of monopoly in general equilibrium. Working Paper. University of Warwick, Department of Economics, Coventry.
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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.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Tariff, Taxes, Monopolies|
|Series Name:||Warwick economic esearch papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Number of Pages:||41|
|Institution:||University of Warwick|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|References:||Avriel, M., Diewert, W., Schaible, S., and Zang, I. (1988). Generalized concavity. New York: Plenum Press. Blackorby, C. and E. Diewert (1979). Expenditure functions, local duality, and second order approximations. Econometrica, 47, pp.579-602. Blackorby, C. and S. Murty. (2007). Unit versus ad valorem taxes: monopoly in general equilibrium. Journal of Public Economics, 91, pp.817-822. Cournot, A. (1960). Researches into the mathematical principles of the theory of wealth. London: Frank Cass and Co. Translated from Recherches sur les principes mathématiques de la théorie des richesses, 1838. Delipalla, S. and M. Keen. (1992). The comparision between ad valorem and specific taxation under imperfect competition. Journal of Public Economics, 49, pp.351-367. Guesnerie, R. and J. Laffont. (1978). Taxing price makers. Journal of Economic Theory, 19, pp.423-455. Guesnerie, R. (1980). Modéles de l’economie publique in monographie du Séminaire d’Econometrie. Paris: Editions du Centre National de la Recherche Scientifique. Guesnerie, R. (1995). A contribution to the pure theory of taxation. Cambridge, UK: Cambridge University Press. Keen, M. (1998). The balance between specific and ad valorem taxation. Fiscal Studies, 19, pp.1-37. Lockwood, Ben. (2004). Competition in unit vs. ad valorem taxes. International Tax and Public Finance, 11, pp.1-10. Milnor, J. (1931). Topology from the differentiable viewpoint. Princeton, New Jersey: Princeton University Press. Quinzi, M. (1992). Increasing returns and efficiency. Oxford; New York: Oxford University Press. Skeath, S. and G. Trandel. (1994). A pareto comparison of ad valorem and unit taxes in noncompetitive environments. Journal of Public Economics, 53, pp.53-71. Suits, D. and R. Musgrave. (1953). Ad valorem and unit taxes compared. Quarterly Journal of Economics, 67, pp.598-604. Wicksell, K. (1959). Taxation in the monopoly case. In Musgrave, R. and Shoup, C., Readings in the economics of taxation. London: Allen and Unwin. [An extract from Finanztheoretische Untersuchungen nebst Darstellung and Kritik des Steuerwesens Schwedens, Gustav Fisher, Jena, 1896.]|
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