politics growth and inequality in rural china does it pay to join the party abstract economic reform is often constrained because rank and file bureaucrats responsible for implementation have vested interests that oppose change drawing on an unusual longitudinal survey data set for a representative rural county in northern china we show an alternative positive scenario consistent with the presence of an implicit performance based incentive contract that ties the household incomes of local officials to market liberalization increases in consumer demand and the provision of local public goods the mechanisms appear to be tolerated as the fruits of growth are shared fairly equitably thus allowing implementation of a politically and economically self reinforcing reform process

commodity taxes under uncertainty abstract this paper considers the relative distorting effect on output of commodity taxes specific and ad valorem in a situation where a firm faces revenue uncertainty it is shown generally that this effect depends both on the precise nature of the firm s revenue uncertainty and on the degree of its risk aversion more specifically the distorting effect of each tax is characterised for a selection of objective functions and uncertain environments these characterisations are compared in order to show the influence of alternative specifications on the relative distorting effect

how should commodities be taxed market structure product heterogeneity and the optimal structure of commodity taxes abstract this paper is concerned with the form in which commodity taxes are best imposed and particularly with the appropriate balance between specific and ad valorem components this neglected issue is of policy importance in relation to the harmonization of tax structures within the eec and of theoretical interest as a point of contact between optimal tax theory and models of non price competition the roles of the two taxes as purely corrective devices under a variety of market forms are established and discussed the analysis suggests that heavily taxed commodities should normally be subject to high specific rather than high ad valorem taxes

short run impacts of a severance tax change evidence from alaska energy states face a fundamental tradeoff when increasing severance tax rates potential gains in tax revenues versus potential losses in exploration development and production activity despite the significant implications of this tradeoff there is very little empirical evidence on the short run responsiveness of extraction related activities to changes in severance taxes we conduct a comparative case study to evaluate the short term impact of a severance tax increase on oil related activities and development in alaska in 2007 the introduction of alaska s clear and equitable share aces more than tripled the tax liability for much of the oil already under production in alaska we construct a synthetic alaska from a set of u s energy states with the purpose of estimating the counterfactual evolution of oil production exploration and development wells gross state product and employment in the absence of aces overall our results indicate that there is no discernible difference in the outcome variables of interest between alaska and its synthetic control after the implementation of aces suggesting that aces had a minimal effect on alaskan oil related activity and development in the short run

global warming policy a public finance perspective in the last few years a substantial volume of research has considered the design of taxes to slow greenhouse gas emissions as well as the economic effects of such policies in this paper i summarize the insights that have emerged from this work i begin by explaining that while efficiency considerations create a presumption for using coordinated international policies to alter greenhouse gas emissions the prospects for such action are bleak then i focus on the public finance of carbon taxes at the national level considering the design of such taxes as well as their incidence across and within nations next i focus on greenhouse gas emission policies that could be enacted in less developed countries such as the elimination of fossil fuel subsidies and other policies to slow deforestation finally i suggest several promising directions for future study

economic efficiency effects of alternative policies for reducing waste disposal abstract reducing the amount of municipal solid waste that is disposed of has become an important policy goal previous research argued that a virgin material tax offered an efficient method of meeting this goal and it continues to be considered as a policy option today this paper demonstrates however that a virgin material tax is not an efficient method of reducing waste but that an alternative policy a combined disposal tax and reuse subsidy is the combined disposal tax and reuse subsidy is theoretically consistent with unit based household charges for waste disposal but may have advantages in some situations

taxation in a two sided search model abstract this paper analyzes the effects of wage and profit taxation in a simple search and bargaining model wage tax effects depend upon the level of unemployment benefits if unemployment benefits are less than search costs or if benefits are taxed as income then a wage tax decreases unemployment it also decreases the wage thereby overshifting the tax burden profit tax effects depend upon job entry in the short run with a fixed number of jobs filled jobs plus vacancies a profit tax decreases unemployment it also raises the wage again overshifting the tax in the long run the converse holds

green taxes can we protect the environment and improve the tax system at the same time on a cursory inspection public economics appears to provide a straightforward and compelling answer of yes to the question posed in the title to this paper as economists have long argued appropriately designed taxes can in principle at least efficiently restrain levels of polluting activities and in addition such taxes will generate revenues so that we can reduce rates on other forms of taxation that distort the functioning of the economy green taxes in short promise a double dividend they can both reduce excessive levels of pollution and increase the efficiency of the overall tax system at least so several economists have argued recently 17 20 but is this really so with the growing recognition of the enormous revenue potential of certain environmental taxes especially carbon taxes to address the problem of global warming public economists have returned to this question with a new round of research efforts directed both to understanding the properties of pollution taxes as revenue sources and to estimating their revenue potential and the magnitude of their effects on the economy and the newly emerging literature is producing some quite astonishing and very troubling findings in this paper i want to review this work and explore its implications when viewed in relation to some other research it appears to suggest that most forms of regulatory activity at least those that increase the costs of the regulated activities may have hitherto unappreciated costs of a stunning magnitude what many of us would have taken to be second order side effects of environmental and other regulatory policies can be of a magnitude that compromises to a significant extent their welfare enhancing properties having reviewed this body of work i wish also to explore some issues in the political economy of green taxes it is helpful to begin by briefly putting the issue in historical perspective

rethinking inequality decomposition with evidence from rural china we examine inequality decompositions by income source and describe a general regression based approach for decomposing inequality the approach provides an efficient and flexible way to quantify the roles of variables like education and age in a multivariate context we illustrate the method using survey data from china the empirical results demonstrate how sharply different conclusions can emerge for different decomposition rules we explain how these differences reflect the treatment of equally distributed sources of income and we discuss implications for how results from inequality decomposition are interpreted a renewed interest in economic growth political economy and the distribution of income has again placed the economics of income inequality firmly on the academic research agenda relatively poor performances in latin america have been contrasted with success stories in east asia and recent evidence on the changing income distributions of emerging economic giants like china has

income inequality within and across counties in rural china 1988 and 1995 abstract using household data from samples covering 18 provinces in 1988 and 1995 income inequality within and between counties in rural china is assessed the approach enables us to aggregate average income and income inequality to the levels of provinces and the three regions comprising eastern central and western china most of income inequality in rural china in 1995 was found to be spatial and the uneven development of mean income across counties stood for most but not all of the rapid increase in income inequality mean income of the three regions diverged most forcefully

the efficiency of indirect taxes under imperfect competition abstract this paper considers the relative efficiency of ad valorem and unit taxes in imperfectly competitive markets we provide a simple proof that ad valorem taxes are welfare superior to unit taxes in the short run when production costs are identical across firms the proof covers differentiated products and a wide range of market conduct cost asymmetries strengthen the case for ad valorem taxation under cournot competition but unit taxation may be welfare superior under bertrand competition with product differentiation ad valorem taxation is superior with free entry under cournot competition but not necessarily under price competition when consumers value variety

excise taxes on a non uniform pricing monopoly ad valorem and unit taxes compared in this paper ad valorem and unit taxation are compared on a model that allows for various monopolistic pricing policies including uniform pricing and all three types of pigouvian price discrimination it shows that for any given unit tax on a non uniform pricing monopoly 1 there exists an output neutral ad valorem tax rate that gives rise to a higher tax yield than the unit tax and 2 there exists an ad valorem tax rate that welfare dominates the unit tax not only in the aggregate sense but also in the pareto sense taxes d accise dans le cas d un monopole qui n a pas une tarification unique comparaison des taxes ad valorem et unitaire ce memoire compare la taxe ad valorem et la taxe par

tax incidence in differentiated product oligopoly abstract we analyze the incidence of ad valorem and unit excise taxes in an oligopolistic industry with differentiated products and price setting bertrand firms both taxes may be passed on to consumers by more than 100 percent and an increase in the tax rate can increase short run firm profits and hence the long run number of firms we provide summary conditions for these effects to arise the conditions depend on demand curvatures and are written in elasticity form surprisingly the analysis largely corroborates cournot results with homogeneous demand

the cut off grade and the theory of extraction the cutoff grade problem arises when technological infeasibility or high cost prevents an extractive firm from exploiting a heterogeneous deposit in strict sequence the optimal cutoff grade varies directly with anticipated changes in present value price a stochastic price path induces a higher lower initial cutoff grade if the marginal profit function is concave convex the optimal response to an unanticipated price change depends on the difference between the rates of change in price along the new and original price paths and whether or not the firm can increase extractive capacity including the life of the mine

are there dynamic gains from a poor area development program poor area development programs in which the government transfers extra resources to unusually poor areas have been widely used to fight poverty there has been some research on such programs but little is known about their impact on household living standards over time the authors address the issue for a sizable poor area development program in rural china china s program had a significant impact on rural living standards in the targeted areas of the sample the consumption growth model suggests that households living in the targeted areas had a higher rate of consumption growth than one would have otherwise expected nonetheless the authors found that while the gains in growth were enough to prevent an absolute decline in average living standards they were not enough to reverse the strong underlying divergent tendencies in the rural economy

how should commodities be taxed a supergame theoretic analysis abstract this paper studies the impact of commodity taxes on the sustainability of collusion in imperfectly competitive markets we consider both a cournot and a bertrand supergame with discounting with collusion being supported by either grim trigger strategies or stick and carrot optimal punishments we show that irrespective of firms choice variable and under both punishment schemes increased reliance on ad valorem taxation makes it easier for firms to sustain a collusive agreement contrary to the conventional wisdom according to which ad valorem taxation should be preferred on welfare grounds we find that welfare under specific taxation might be higher than welfare under ad valorem taxation the main conclusion of our analysis is that traditional welfare results on the comparison between ad valorem and specific taxation based on static models do not necessarily survive in a dynamic setting where the possibility of collusion among firms is taken into account in response to an increase in the ad valorem tax rate sufficiently patient firms might find it rational to form an implicit cartel which would not have existed otherwise

correlated uncertainty and policy instrument choice abstract for two decades environmental economists have generally maintained that benefit uncertainty is irrelevant for choosing between price and quantity instruments but that cost uncertainty matters with the identity of the efficient instrument depending upon the relative slopes of the marginal benefit and cost functions but in the presence of simultaneous correlated uncertainty such policy instrument recommendations may be inappropriate with plausible values of relevant parameters the conventional identification of a price instrument will be reversed to favor instead a quantity instrument the opposite reversal from the choice of a quantity instrument to a price instrument seems less likely to occur

a pareto comparison of ad valorem and unit taxes in noncompetitive environments abstract a literature that began with wicksell 1896 has shown that an ad valorem tax is welfare superior to an equal yield unit tax in both monopoly and oligopoly markets this paper proves a stronger result for any unit tax imposed on a monopoly there exists an ad valorem tax that pareto dominates it that produces larger profit tax revenue and consumer surplus the paper then considers whether this pareto result generalizes to all cournot nash oligopolies the paper shows that pareto dominance holds in such markets whenever the tax level exceeds a critical value that depends on various market parameters

intertemporal effects of environmental mandates environmental mandates can impose large costs on the businesses that must comply with them understanding the effects of those costs on production decisions may require a dynamic framework if environmental damages and the costs of complying with mandates depend on cumulative production or the passage of time this paper focuses on the time dimension of general categories of fixed and variable costs arising from different types of mandates the paper develops an optimal control model to predict how such costs may jointly affect current production rates plant closure dates and cumulative production theoretical results derived from the comparative statics of the system of equations describing the solution to that model identify circumstances in which the policy goals of greater production and greater environmental protection may not always be at odds

economic growth income inequality and poverty in china under economic reforms china s gross domestic product gdp more than quadrupled between 1978 and 1996 under economic reforms per capita disposable incomes more than tripled in the cities and almost quadrupled in the rural areas however rapid economic growth brought about large income inequality which slowed down poverty reduction in 1995 there were still 70 170 million people living in poverty this article aims to assess the relationship between economic growth income inequality and poverty using both secondary and household survey data the main findings are 1 urban rural divide and spatial inequality are two major factors accounting for overall income inequality 2 non wage and non farm incomes are more unequally distributed than wage and farm incomes and 3 the incidence of poverty is very sensitive to the changes in per capita income and inequality

economic indicators of resource scarcity a critical essay abstract the theoretical arguments of the conceptual and empirical literature on economic indicators of long run resource scarcity are logically flawed if resource allocators were informed of the nature of resource scarcity their behavior and the economic indicators it generates would reflect the scarcity but if they were so informed we could simply ask them if resources were scarce if they are not informed their behavior and economic indicators are as likely to indicate their ignorance as the reality unfortunately there is no way of knowing whether they are informed or not unless we already know whether resources are scarce

price expectations ore quality selection and the supply of a nonrenewable resource abstract economic models of depletion imply that the present value price of a resource and the quality of extracted ore should be directly related the empirical evidence is that in the short run the average quality of extracted ore and in some cases metal output decline in response to a price increase this paper examines a model of extraction with heterogeneous ore quality within a deposit and revised price expectations in which this seemingly paradoxical supply response is rationalized as the outcome of ore quality selection which maximizes the present value of the mine

the comparison between ad valorem and specific taxation under imperfect competition abstract this paper compares ad valorem and specific taxation in two models of oligopoly with and without free entry predominantly ad valorem taxation implies a relatively low consumer price high tax revenue and when entry is precluded low profits ad valorem taxation dominates specific taxation from the welfare perspective the set of circumstances under which with free entry specific taxation raises welfare is a strict subset of that in which ad valorem taxation is welfare improving and in both models the maximisation of consumer welfare subject to a binding revenue constraint requires maximum reliance on ad valorem taxation

estimating tax incidence market power and market conduct the european cigarette industry abstract recent theoretical work has shown that the incidence of ad valorem and specific taxes may differ and each may be over or under shifted onto consumers in the presence of imperfect competition these results are used to derive a method of estimating market power and conduct an application is made to the european cigarette industry previous empirical comparison of the incidence of ad valorem and specific taxes is limited for a group of countries with broadly similar cigarette industries there is evidence of undershifting of both taxes with the specific tax having a significantly greater impact on price the extremes of both perfect competition and monopoly can be rejected behaviour is no less competitive than the equivalent of cournot

optimal monetary and fiscal policies in a search theoretic model of monetary exchange abstract search models of monetary exchange commonly assume that terms of trade in anonymous markets are determined via nash bargaining which generally causes monetary equilibrium to be inefficient bargaining frictions add to the classical intertemporal distortion present in most monetary models whereby agents work today to obtain cash that can be used only in future transactions in this paper we study the properties of optimal fiscal and monetary policy within the framework of lagos and wright 2005 we show that fiscal policy can be implemented to alleviate underproduction while money is still essential if lump sum monetary transfers are available a production subsidy can restore the efficiency of monetary equilibria the friedman rule belongs to the optimal policy set but higher inflation rates are also possible when lump sum monetary transfers are not available equilibrium allocations are generally not first best nevertheless fiscal policy still results in substantial welfare gains money can be extracted from circulation via a sales tax on decentralized market activities and the friedman rule is only optimal if the buyer has relatively low bargaining power

the impact of migration on rural poverty and inequality a case study in china large numbers of agricultural labor moved from the countryside to cities after the economic reforms in china migration and remittances play an important role in transforming the structure of rural household income this article examines the impact of rural to urban migration on rural poverty and inequality in a mountainous area of hubei province using the data of a 2002 household survey since migration income is a potential substitute for farm income we present counterfactual scenarios of what rural income poverty and inequality would have been in the absence of migration our results show that by providing alternatives to households with lower marginal labor productivity in agriculture migration leads to an increase in rural income in contrast to many studies that suggest that the increasing share of nonfarm income in total income widens inequality this article offers support for the hypothesis that migration tends to have egalitarian effects on rural income for three reasons 1 migration is rational self selection farmers with higher expected return in agricultural activities and or in local nonfarm activities choose to remain in the countryside while those with higher expected return in urban nonfarm sectors migrate 2 households facing binding constraints of land supply are more likely to migrate 3 poorer households benefit disproportionately from migration

taxation of nonrenewable resources at various stages of production a general method of assessing tax policy effects in exhaustible resource industries is derived the model includes both extraction and processing by a vertically integrated firm and taxation can occur at any stage of production many of the standard results of the theoretical resource taxation literature are derived in a unified framework when stages of production are introduced it is seen that tax policy effects can differ dramatically from those predicted by the simpler model after the method of determining the effects of existing taxes is derived a procedure for designing taxes that achieve desired goals is analysed

indirect taxation in vertical oligopoly this paper analyzes the effects of specific and ad valorem taxation in an industry with downstream and upstream oligopoly we find that in the short run i e when the number of firms in both markets is exogenous the results concerning tax incidence tend to be qualitatively similar to models where the upstream market is perfectly competitive however both over and undershifting are more pronounced potentially to a very large extent instead in the long run under endogenous entry and exit overshifting of both taxes is more likely to occur and is more pronounced under upstream oligopoly as a result of this a tax increase is more likely to be welfare reducing we also demonstrate that downstream and upstream taxation are equivalent in the short run while this is not true for the ad valorem tax in the long run we show that it is normally more efficient to tax downstream

income equivalence and a proposed resource rent charge abstract we demonstrate the equivalence of various income based charges when perfect certainty prevails as well as deviations from equivalence under uncertainty some of these equivalences are known but the derivations of others such as cases for two types of free equity are not these equivalences lay the foundation for a proposed accrued rent charge arc as an alternative to resource rent taxes rrt both as proposed and implemented we argue that the arc may be preferred to the rrt because the timing of returns to investors owners of reproducible capital and owners of natural assets coincide that is returns accrue to owners of natural assets earlier in time with the arc relative to the rrt in addition we argue that while both charges are inefficient when there is uncertainty the arc may be relatively more administratively and economically efficient finally we use simulations to compare the arc to the rrt and to standard income charges and discuss the results

severance taxes and market structure in an exhaustible resource industry abstract this paper compares the effects of a severance tax on profit maximizing competitive and monopolistic firms which explore and produce an exhaustible resource the producers response to the tax are studied and the deadweight losses from the tax are calculated time paths of exploratory effort extraction and price are computed severance taxes lead both producers to reduce production and exploration and cause a shift in the time path for prices the deadweight losses from the tax are low especially in competition the losses in the monopoly case are relatively higher with the tax burden falling mainly on the monopolistic producer

taxation ore quality selection and the depletion of a heterogeneous deposit of a nonrenewable resource abstract the effect of taxation on depletion is examined when ore quality varies within a deposit and the firm s selection of the sequence of exploitation is constrained tax policies in this setting are less conserving of the resource than if ore quality is homogeneous and can be less conserving of the resource than in other models of ore quality selection for example a constant severance tax can induce faster depletion decrease the life of the mine reduce total recovery and increase metal output in periods when extraction is positive

resource characteristics extraction costs and optimal exploitation of mineral resources this paper modifies the traditional theories ofnon renewable resource exploitation where reserve sizeis assumed to be the major determinant of extractioncosts in a competitive model of resourceexploitation characteristics of aggregate reservesare considered as a determinant of extraction cost then dynamic solutions for the price and exploratoryefforts are developed various price paths arefeasible under different assumptions with regard tothe changes in the reserve characteristics over time past empirical research shows that there is noconsistent price path for all materials in fact itis the quality of newly discovered reserves as well astheir size that has affected material prices todemonstrate the complexity of a firm s decision torecover mineral from new deposits potentials forsubstantial high quality marine mineral resources areevaluated as a substitute for land based resources however several factors including the decreasingtrend in marine mining r d expenditures and thepotential impact of large scale marine mining on priceof minerals indicate that mining of mostnon hydrocarbon marine minerals will not take place inthe near future

the length of life and the standard of living economic influences on premature death in china a detailed survey of mortality is used to analyse the determinants of premature death in rural china premature death is found to be inversely related to income higher income in a county reduces its mortality rate ceteris paribus the inverse relationship is found for most major illnesses and might be explained by the large element of self reliance in the funding of health care expenditures in china both at the household and the local levels these and other results are used to address the basic question why has there been a remarkable decline in premature mortality in china since the early 1950s the contributions of income of deliberate health care policies and of collective organisation are examined

imperfect competition the marginal cost of public funds and public goods supply abstract this paper analyses the impact of changes in product market competition on the marginal cost of public funds mcpf and public goods supply when distortionary commodity taxes are used to raise revenue first less competition measured by a switch from bertrand to cournot conduct or a decrease in the elasticity of demand does not necessarily raise the mpcf second even if it does optimal public good supply does not necessarily fall the paper also presents a method for modelling bertrand and cournot competition in general equilibrium that may be of independent interest

a note on the effect of tax brackets on non renewable resource extraction abstract tax brackets are a common feature of non renewable resource taxes although the introduction of brackets would seem to be an innocuous way of approximating a non linear tax system the dynamic effects are surprising this paper shows that the presence of tax brackets in both a severance tax system and a profits tax system can induce the extractive firm to depart from the well known monotonically declining extraction profile and to choose instead a profile which has constant extraction rates over some interval of time

issues in the design of environmental excise taxes t ax law has long had environmental consequences although the consequences have often been unintended for example tax provisions passed to assist the timber industry in the 1920s permitted expensing of the costs of reforestation and planting rather than having to depreciate them over a period of time along with capital gains treatment for harvested timber provisions which may have encouraged a more rapid harvest of domestic timberland percentage depletion allowances to assist the oil industry a deduction based on a percentage of the value of oil sold rather than the taxpayer s basis in the oil which became part of the internal revenue code in 1926 arguably have led to exploitation of oil and mineral deposits at a rate greater than the socially optimal rate similarly the purpose of the federal motor fuels tax when expanded in 1956 was to fund highway construction although now it is common to regard it as at least potentially an environmental tax aimed at addressing the externalities caused by automobile use of course these tax provisions were not motivated by environmental concerns the 1970s began to see efforts at environmental tax policy although at the time the focus of the policies more often was energy conservation rather than reduction in pollution between 1978 and 1986 congress provided tax credits for residential energy conservation expenditures in 1978 congress enacted the gas guzzler excise tax an excise tax that varies with the environmental protection agency s fuel economy rating of automobiles it remains in force today congress also made available tax exempt bond finance for pollution control equipment between 1978 and 1986

optimal taxation of exhaustible resource under monopoly abstract this paper deals with the problem of using taxes or subsidies to correct the inefficient resource allocation under monopoly in this paper the question raised is what would be the optimal tax on resource extraction under monopoly ultimately it is shown that taxes may be devised to generate price and extraction paths under monopoly that are identical to those under the competitive equilibrium tax policy can thus be used as an instrument for changing the distortionary resource allocation generated by the monopolist

uncertainty and pollution the role of indirect taxation abstract this paper explores the potential usefulness of indirect taxation as a supplement to effluent charges it is argued that effluent charges should typically be accompanied by taxes on privately traded commodities linked to the pollutant in consumption or production the performance of such combinations of taxes and charges is then compared to that of an effluent standard

taxing to control social costs the case of alcohol whether taxation of alcoholic beverages is an appropriate means of reducing social costs of alcohol consumption is a continuing public policy issue some argue that the public health costs and other external costs associated with the consumption of alcoholic beverages are so significant as to justify substantial excise taxes on those beverages others counter that a tax on alcohol would reduce consumption indiscriminately and therefore reduce the satisfaction experienced by millions of sensible drinkers without necessarily reducing the harm caused by a few excessive drinkers 2 this paper presents and applies a framework for evaluating these two views of the efficiency welfare effects of alcohol taxes determining the efficiency implications of alcohol taxes is complicated by the question of whether and how much abusers especially alcoholics benefit from alcohol consumption standard welfare theory assumes that all consumers of alcohol enjoy positive net benefits consumer surplus however it is possible that alcoholics over consume in the sense that consumer surplus from their

perfect competition urbanization and tax incidence in the retail gasoline market i introduction in applied tax incidence studies it is typically assumed that prices respond one for one to changes in sales and excise taxes chernick and reschovsky 1997 pechman 1985 shepard 1976 state of wisconsin department of revenue 2004 wiese rose and schluter 1995 zupnick 1975 is this assumption reasonable despite the fundamental role of tax incidence in the study of public finance there is surprisingly little empirical analysis that sheds light on who bears the burden of taxes in this article we examine the incidence of state gasoline excise taxes using monthly price data for all 50 states in the united states over the period 1984 1999 our estimation results generally indicate full shifting of gasoline taxes to the final consumer with changes in gasoline taxes fully reflected in the tax inclusive gasoline price almost instantly we also find that the incidence of excise taxes depends on the competitiveness of retail gasoline markets e g urban vs rural markets gasoline markets in urban states typically exhibit full shifting but those in rural states demonstrate somewhat less than full shifting although the issue of sales and excise tax incidence has received considerable attention over the years most research has focused on tax incidence theory and the standard conclusion of much of this theoretical analysis is that consumers bear the full burden of any sales and excise taxes 1 based primarily on this theoretical foundation most applied incidence studies assume that sales and excise taxes are fully reflected in consumer prices and the distribution of tax burdens across income classes necessarily reflects this assumption however actual empirical testing of this assumption of full forward shifting has been surprisingly sparse 2 in important recent research poterba 1996 and besley and rosen 1999 have conducted empirical analyses of the incidence of excise taxes poterba 1996 uses city specific clothing and personal care price data covering the 1947 1977 and the 1925 1939 periods to examine the degree to which state and local retail sales taxes are shifted to consumers with two data sets based on bureau of labor statistics bls city specific consumer price indices using these bls data on tax inclusive prices poterba 1996 constructs quarterly price indices for each of 28 standard metropolitan statistical areas smsas many of these 28 smsas experienced significant changes in sales tax rates and poterba 1996 uses these tax shocks to determine the incidence of sales taxes his estimation results are somewhat variable but in general he finds for the postwar period that taxes are fully shifted to consumers in some cases he finds limited evidence of overshifting although it is never possible to reject the null hypothesis that prices rise point for point with the changes in the tax and he also finds that full shifting typically though not always occurs in the first quarter of the tax change poterba 1996 also examines tax incidence for individual smsas during the depression era and his results indicate significant differences across metropolitan areas in the degree of tax shifting for example prices on women s clothing in chicago show significant overshifting but atlanta shows negative shifting a result that does not seem plausible besley and rosen 1999 also examine the incidence of sales taxes using price data for 12 narrowly defined commodities in 155 different u s cities using quarterly price data for the period 1982 1990 issued by the american chamber of commerce researchers association accra 3 they not only find full shifting for a number of commodities but also find overshifting for more than half the products a result they attribute to imperfect competition in the retail sector while this recent empirical research has significantly expanded our understanding of the actual nature of sales and excise tax incidence we believe that our work here on gasoline excise taxes makes several contributions to the empirical literature

geographic poverty traps a micro model of consumption growth in rural china how important are neighbourhood endowments of physical and human capital in explaining diverging fortunes over time for otherwise identical households in a developing rural economy to answer this question we develop an estimable micro model of consumption growth allowing for constraints on factor mobility and externalities whereby geographic capital can influence the productivity of a household s own capital our statistical test has considerable power in detecting geographic effects given that we control for latent heterogeneity in measured consumption growth rates at the micro level we find robust evidence of geographic poverty traps in farm household panel data from post reform rural china our results strengthen the equity and efficiency case for public investment in lagging poor areas in this setting copyright 2002 john wiley sons ltd

market substitution and the pareto dominance of ad valorem taxation 1 introductionexcise taxes take two basic forms unit taxes based on quantity sold and ad valorem taxes based on sales value while these two versions of excise taxes are equivalent in perfectly competitive markets 1 in noncompetitive markets ad valorem taxation has been shown to welfare dominate unit taxation 2ad valorem taxation also pareto dominates unit taxation in monopoly and in some cases oligopoly markets in the sense that under an isorevenue constraint replacing unit taxation with ad valorem taxation increases both consumer welfare and producer profits skeath and trandel 1994 3in this paper we depart from the homogeneous product oligopoly markets assumed in previous literature by adopting a model of heterogeneous products developed by dixit and stiglitz 1977 first we study the pareto dominance of ad valorem taxation in short run equilibrium where a fixed number of firms produce imperfectly substitutable goods and engage in bertrand competition we define market demand as a weighted sum of firm quantities demanded and market price as a similarly weighted average of firm prices by assuming that market demand is isoelastic with respect to market price our framework allows the elasticity of substitution among the goods in the taxed market and the price elasticity of market demand to bear on the comparison of the two forms of excise taxes we find that in the short run ad valorem taxation always dominates unit taxation both in terms of consumer welfare and overall welfare the precise meaning of overall welfare is made clear later however pareto dominance of ad valorem taxation never exists if market demand is inelastic because in this case firms always earn lower profits under ad valorem taxation restricting our analysis to the case where market demand is elastic we find that ad valorem taxation pareto dominance is more likely the smaller the within market elasticity of substitution or the larger the market demand elasticity we also generalize a prior result for homogenous products increasing the number of firms in a market decreases the likelihood of ad valorem taxation pareto dominance finally we find that for a sufficiently large within market elasticity of substitution ad valorem taxation pareto dominance is more likely the smaller the tax level contrary to an existing result for the homogenous product case given the results of previous literature that unit taxation tends to be welfare dominated by equal revenue ad valorem taxation in noncompetitive environments the existence of both types of taxes must be explained by nonoptimal behavior on the part of government 4 one possible explanation for the coexistence of unit and ad valorem taxes despite the welfare dominance of ad valorem taxation is that a government only cares about the amount of revenue collected from each market and the choice between these two taxes in a specific market is dictated by producers interests which are more concentrated than consumers interests in general given this hypothesis concerning the political economy of choice between the two major forms of excise taxes the results of this paper make testable predictions with respect to how the relative desirability of ad valorem taxation from the perspective of producers changes with several important characteristics of a market the elasticity of substitution among goods in the market the market demand elasticity the number of firms in the market and the level of taxation in the market extending our analysis to long run equilibrium where entry and exit provides an additional market equilibrating mechanism and where firms always earn zero profits we show that an equal revenue switch from unit to ad valorem taxation has welfare effects on consumers through two channels

the taxation of nonreplenishable natural resources revisited abstract the theory of nonreplenishable resource extraction has been extended to allow for extraction costs which increase as deposits are increasingly depleted in these cases profit maximization may result in the cessation of extraction before reserves are totally exhausted the effect of various taxation policies on optimal extraction patterns in these models are derived with a few exceptions the results are that the imposition of a tax will cause operators to extract at faster rates over shorter periods of time and to reduce the total amount of ore extracted the analysis allows for an output price which increases over time

the spatial contribution to income inequality in rural china an income function analysis is conducted of the 2 400 rural counties of china using cross section data income inequality among counties is considerable and accounts for the major part of inequality among rural households in china county income per capita is well explained by province terrain agricultural type location and the relative importance of non agriculture non agricultural activity in turn is strongly assisted by agricultural success an analysis of time series data suggests that a process of cumulative causation operated in the decade after the rural reforms of 1978 increasing spatial inequality in rural investment industrialization and income fiscal redistribution from richer to poorer areas weakened the process but failed to stem it copyright 1993 by oxford university press

tax incidence with bargaining abstract the paper investigates tax incidence in a two person bargaining model where one party is taxed the condition under which the non taxed party shares the burden of taxes or benefit of subsidies is characterized sufficient conditions for the tax burden to fall entirely on the taxed party are given also a sufficient condition for the non taxed party actually to benefit from taxation is given

capital income taxation depletion allowances and nonrenewable resource extraction abstract this paper analyses the distortionary effects of the corporate income tax on the output path of the resource sector and on the allocation of resources between the mining and non mining corporate sectors the cost of capital for a resource industry facing a corporate income tax is derived as well as the resulting effective tax rate on capital income the comparison of the effective tax rates of the mining and non mining sectors pays particular attention to the role played by the depletion allowance in assuring equal treatment

resource taxation with heterogeneous quality and endogenous reserves abstract this paper analyzes the impact of mining taxation on the intertemporal extraction profile for a heterogeneous ore body the extraction profile specifies both quantities and qualities extracted in each period total extraction is thus endogenously determined the taxes explicitly considered are severance taxes ad valorem or per unit on metal or on ore property taxes and profits taxes with depletion allowance the intertemporal framework integrates economic and geological factors generating new results on extraction distortions and providing qualification or reconciliation of previous diverse results in this area

comparing specific and ad valorem pigouvian taxes and output quotas when the production or use of a good creates an external cost an unregulated market produces a socially inefficient quantity of output one remedy for this inefficiency is to impose a pigouvian tax equal to the marginal external damage associated with the good in many circumstances privately optimizing agents facing a pigouvian tax make decisions that are consistent with the maximization of social welfare

are there lasting impacts of aid to poor areas abstract the paper re visits the site of a large world bank financed rural development program in china 10 years after it began and four years after disbursements ended the program emphasized community participation in multi sectoral interventions including farming animal husbandry infrastructure and social services data were collected on 2000 households in project and non project areas spanning 10 years a double difference estimator of the program s impact on top of pre existing governmental programs reveals sizeable short term income gains that were mostly saved only small and statistically insignificant gains to mean consumption emerged in the longer term though in rough accord with the average gain to permanent income the use of community based beneficiary selection greatly reduced the overall impact given that the educated poor were under covered the main results are robust to corrections for various sources of selection bias including village targeting and interference due to spillover effects generated by the response of local governments to the external aid

wage setting and the tax system theory and evidence for the united kingdom abstract this paper analyses the effects of a non linear tax system on wage bargaining the main conclusions are an increase in the marginal income or payroll tax rate reduces the pre tax wage in the isoelastic case an increase in the average tax rate increases the pre tax wage by more than the tax increase and a measure of the progressivity of the tax system residual income progression is a sufficient measure of the effect of the tax system on wage pressure empirical evidence is presented to support these propositions and the predictions of the model regarding the effect of recent changes to the u k tax system on the distribution of earnings discussed

productivity and metal mining evidence from copper mining firms one of the aims of productivity measurement is to assess the performance of various sectors of the economy with respect to their use of scarce inputs in this paper the emphasis is on the effects of firm behaviour on simple index number measurement of total factor productivity in non renewable resource industries economic theory predicts that when the stock of ore is known and there is positive discount rate an intertemporally profit maximizing firm will often process the best ore first that is ores that are of high grade and or are most easily accessible will be correspond to the lowest cost units of final metal output less capital labour energy and matgerials will be needed in the mining and milling processes

the marginal efficiency effects of taxes and subsidies in the presence of externalities a computational general equilibrium approach abstract using 1983 data we develop a 19 sector computational general equilibrium model incorporating producer producer externalities and producer consumer externalities simulation results indicate that when additional government expenditure is financed by pigouvian taxes the marginal cost of public funds is substantially below one labor sales and output taxes also affect the output of the polluting industries and thus have indirect pigouvian effects which tend to reduce the associated marginal costs of public funds pigouvian taxes are usually more efficient than pigouvian subsidies since the tax revenue can be used to reduce other taxes