the incidence of non linear price dependent consumption taxes abstract the present article generalizes economic literature on the incidence of consumption taxes to general schedules of consumption taxes dependent on price previous studies were limited to the cases of per unit and ad valorem taxes three main contributions are made methodologically the elasticity of the tax function is introduced as a new parameter so that the price elasticity of general consumption tax schedules in different models of imperfect competition might be dealt with in a tractable manner theoretically existing results on the difference between the incidence of ad valorem and per unit consumption taxes are generalized to non linear consumption taxes the larger the elasticity of the tax function the smaller the share of consumption tax borne by consumers from the perspective of applied public economics it is shown how the regulator may reduce prices in very uncompetitive markets by increasing the elasticity of the consumption tax on a targeted range of producer prices

efficiency considerations and the exemption of food from sales and value added taxes we evaluate efficiency considerations underlying the widespread exemption of food from sales and value added taxes and the implications for tax policy household and restau rant meals and both constant and increasing returns cases are examined higher taxes on food offset the non taxation of time inputs into household production even under constant returns to scale with increasing returns gains from taxing food are higher and amplified by subsidizing restaurant food and all marginal cost components of restaurant meals on effi ciency grounds exemption of food from sales and value added taxes emerges as socially costly policy especially under increasing returns

price reducing taxation abstract we show that the imposition of an ad valorem tax on a free entry cournot nash industry may lower price the conditions that the cost function must satisfy for this to occur are characterised and the issue of multiple equilibria is resolved

excise taxes with multiproduct transactions i examine excise taxes levied on multiproduct retailers excise taxes reduce equilibrium output and decrease equilibrium product variety in the short run but taxes can raise output per product in the long run and induce entry excise taxes are overshifted into prices in a wide range of cases including under linear and concave demand conditions and excise taxes shift less than one for one into prices only when demand is highly convex multiproduct transactions substantively alter the efficiency of ad valorem and specific forms of excise taxes and affect the comparison of relative tax performance over short run and long run time horizons jel h25 h32 l11 l13 l81

price pass through and the minimum wage this paper tests a textbook consequence of competitive markets that an industry wide increase in the price of labor is passed on to consumers through an increase in prices using several data sources on restaurant prices i explore the price impact of minimum wage hikes in canada and the united states particular attention is paid to the timing of these price responses to gauge the stickiness of minimum wage cost shocks i find that restaurant prices generally rise with changes in the wage bill and that this response is concentrated in the quarter surrounding the month during which the legislation is enacted

the effects of taxation price control and government contracts in oligopoly and monopolistic competition abstract many government contracts with or policies towards oligopolistic sectors essentially involve private firms selling a given proportion or quantity of output to the government at a fixed price p r with the remainder being sold on the open market often this is combined with consumer rationing examples include cement and sugar in india and health housing and defence in many countries the paper investigates the effects of these schemes including sales and excise taxation on prices output and household welfare under oligopoly and monopolistic competition less government control reduced may raise prices and tax shifting can be above or below 100 percent

secret versus public reserve price in an outcry english procurement auction experimental results abstract in a set of human experiments we analyze the impact of the buyer s reserve price policy in an online open outcry reverse auction we measure the impact of revealing or not the reserve price on the buyer s expected cost when suppliers may be risk averse results confirm that the optimal public reserve price policy dominates for the buyer when the lowest cost supplier is weakly risk averse but in contrast with theory the secret reserve price policy does not dominate when he becomes very risk averse analysis of strategic suppliers bidding behavior shows in conformity with theory that they react to the secret reserve price and are more aggressive when they are more risk averse this explains why the optimal public reserve price does not perform better in this context but is equivalent to the secret one however strongly risk averse bidders are less aggressive than predicted by theory that is why the secret reserve price policy does not strictly dominate

impact of cost shocks on consumer prices in vertically related markets the case of the french soft drink market we develop a structural econometric model of the vertical contracts between soft drink manufacturers and retailers to assess the impact of taxes or changes in production costs on consumer prices using individual data on food purchases from a representative survey of 19 000 french households in 2005 we estimate consumer demand using a random utility approach among a set of possible vertical relationships we select the model that best fits the data we evaluate the pass through rate of changes in input costs sugar or of taxes and show that the industry over shifts cost changes or excise taxes to the consumers this result challenges the belief that firms do not pass on the full extent of cost changes or excise taxes to consumers

cross border shopping and the optimum commodity tax in a competitive and a monopoly market using a partial equilibrium model optimality rules for a commodity tax are derived for an economy that is exposed to cross border shopping in a competitive market the conventional inverse elasticity rule is shown to be valid with the qualification that it is the elasticity of domestic rather than total demand that matters with a foreign monopoly the inverse elasticity is modified by a tax shifting effect when the supplier is a multinational firm price repercussions abroad should be taken into account the implications for domestic taxation of the prices and taxes set abroad are also examined

a policy response to the e commerce revolution the case of betting taxation in the uk several environmental changes in the 1990s including the introduction of a national lottery the rise of internet gambling and the reduction of trade barriers within the eu induced the uk government to initiate a large scale review of betting duty as a result of this review the government recently announced a significant reduction in betting taxes they also decided to replace the current general betting duty gbd levied as a proportion of betting stakes with a gross profits tax gpt based on the net revenue of bookmakers we examine the economic rationale behind these decisions and demonstrate how these tax changes have broad implications regarding optimal levels of taxation for other sources of government revenue

the effects of firm specific taxes and government mandates with an application to the u s unemployment insurance program abstract we examine the common but unexamined case of a tax or government mandate whose cost differs across firms within the same labor market our theoretical model shows that this variation can lead to employment reallocation across firms and dead weight losses even if there is no aggregate employment effect using firm level unemployment insurance tax data we find that while the market level tax is mostly born by the worker individual firms can only pass on a small share of the within market differences thus in some cases differences in taxes across firms can lead to large dead weight losses

tax incidence in a simple general equilibrium model with collusion and entry abstract we develop a two sector general equilibrium model in which oligopolistic firms collude non cooperative and earn positive economic profits even though there is free entry entry decisions involve balancing sunk costs with the present value of future profits the interest rate is determined in a capital market in which ownership of the capital stock and shares of firms are traded since the degrees of collusion and entry depend on future profits both are influenced by the interest rate we show how tax induced changes in the interest rate affect market structure in general entry and collusive pricing effects work in opposite directions

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

evaluating impact effects of tax reforms abstract this survey paper provides coverage of the inputs from the theory side which go into the empirical analysis of impact effects of tax reforms inequality social welfare progressivity and horizontal inequity effects are considered the value judgements inherent in selecting the target group for analysis specifying welfare through household utility equivalizing incomes and otherwise incorporating differences in household needs into utilitarian analysis are all explained the evaluation procedures described include dominance checks and index comparisons the inequality and social welfare tests are also applicable to other comparisons of income distribution standard computer software to sort cumulate and compute covariances is all that is required to undertake the necessary computations using microdata

monitoring moral hazard asymmetric information and risk sharing in procurement contracting this article characterizes the optimal procurement contract for a monopsonistic purchaser who contracts with a risk averse supplier with private information about his costs and who contributes an unobservable effort the costs incurred by the supplier may be uncertain and the purchaser has access to a monitor of costs that may be subject to noise that complicates risk sharing the purchaser prefers to respond to the observability problem with afixed price contract and to respond to the private information problem with a cost plus contract with uncertain costs and a perfect monitor the optimal contract relieves the supplier of some risk and the purchaser prefers that the effort of the supplier be subsidized with deterministic costs and a noisy monitor the optimal contract places risk on the supplier and the purchaser may prefer that the effort of the supplier be taxed procurement of goods and services is an important form of economic exchange that is often characterized by bargaining and contracting rather than by exchange in a competitive market the procurement setting analyzed here corresponds to the case in which the purchaser is a monopsonist who contracts with a single supplier as in the case of the department of defense contracting for the delivery of a military system in such a setting a principalagent model may be a reasonable representation of the relationship between the purchaser and the supplier and the economics of the procurement arrangement is then captured in the contract when the item procured is standardized the relevant information is likely to be common knowledge and risk may be minimal in such a case a fixed price contract may satisfactorily resolve the purchaser s contracting problem in contrast the model considered here is intended to represent the procurement of a nonstandardized item about which information is incomplete costs are uncertain and observability of supplier costs by the purchaser is limited procurement thus is complicated by the conjunction of adverse selection risk sharing and moral hazard problems

pass through and consumer search an empirical analysis retail price pass through is one of the most important issues facing manufacturers of consumer packaged goods although retailers tend to pass higher wholesale prices through to consumers quickly and completely they often do not pass on trade promotions currently asymmetric pass through is commonly thought to result from retailers exercise of market power alternatively it may be because of consumer search behavior and retailers competitive response we test this theory using a panel threshold asymmetric error correction model applied to wholesale and retail scanner data for ready to eat cereal for a number of retailers in the los angeles metropolitan market we find that consumer search behavior contributes significantly to imperfect pass through by allowing pass through to depend on market power and consumer search costs we find results that are contrary to the conventional wisdom namely market power causes retail prices to fall quickly and rise slowly whereas consumer search behavior causes retail prices to rise quickly and fall slowly precisely the rockets and feathers phenomenon

timber sale auctions with random reserve prices this paper analyzes first price sealed bid auctions of standing timber organized by the french forest service office national des forets onf a feature of these auctions is that they are held wi

new perspectives on public finance recent achievements and future challenges abstract the advances in the economics of the public sector during the past quarter century have been as pronounced as in any field within economics public finance has become a rigorous branch of applied microeconomics incorporating the best thinking and most advanced tools of both theoretical economics and econometrics in the remarks below i will focus on a few key areas in applied and theoretical tax and expenditure policy drawing both upon the academic work of myself and others and my experiences in the policy arena both as chairman of the council of economic advisers and as chief economist of the world bank i shall address both the questions of what we have learned in the past few decades as well as the questions where further research is needed

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

core and periphery in the european monetary union bayoumi and eichengreen 25 years later bayoumi and eichengreen 1993 establish a emu core periphery pattern using 1963 1988 data we use same methodology sample window length 1989 2015 and a novel over identifying restriction test to ask whether the emu strengthened or weakened the core periphery pattern our results suggest the latter

are flexible taxation mechanisms effective in stabilizing fuel prices an evaluation considering wholesale fuel markets in this paper we study the incidence of specific taxes in the italian fuel markets and exploit these findings to simulate the effects of fiscal policies aimed at mitigating oil price fluctuations we estimate several reduced form specifications using as dependent variables the equilibrium wholesale prices for gasoline and motor diesel over the period 1996 2007 in particular we assess the impact on wholesale gasoline and motor diesel prices stemming from the creation of an automatic fiscal mechanism consisting of reductions in specific taxes matching the rise in oil prices our simulations suggest that flexible taxation mechanisms could not be a proper policy for stabilizing price levels in fuel markets a more effective control on prices can be obtained by focusing on the market structure of these industries where antitrust authority could play a significant role

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

who pays sales taxes evidence from french vat reforms 1987 1999 the point of this paper is to provide visual evidence of tax shifting and to measure empirically the distribution of the sales tax burden between consumers and producers for that purpose two french reforms are studied these reforms entail steep decreases of the vat rate september 1st 1987 the vat rate on car sales went down from the luxury rate of 33 33 to the full rate of 18 6 september 1st 1999 the vat rate on housing repair services went down from the full rate of 20 6 to the reduced rate of 5 5 the consumer share of the sales tax burden is 57 in the new car sales market and 77 in the housing repair services market

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

the distribution of harm in price fixing cases we consider a vertically related industry and analyze how the total harm due to a price increase upstream is distributed over downstream firms and final consumers for this purpose we develop a general model without making specific assumptions regarding demand costs or the mode of competition we consider both the case of homogeneous and differentiated goods markets and illustrate how basic intuition from the tax incidence literature carries over to the distribution of harm furthermore we discuss data requirements and suggest explicit formulas and regression specifications that can be used to estimate the relevant terms in the harm distribution in practice

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

induced technical change adjustment costs and environmental policy modelling in this paper i develop a neo schumpeterianmodel of induced technical change where firms polluters determine their effort in environment saving technical change two technological scenarios are distinguished depending on whether basic research is endogenous or exogenous building on this analytical setting i show that in the presence of non linear adjustment costs the choice of instruments of environmental policy should be tailored to the actual characteristics of the firms polluters technological environment moreover this analysis confirms that searching for efficient environmental policy mixes is more rewarding than focusing on single instruments notably pollution taxation

can higher cigarette taxes improve birth outcomes abstract this study examines whether higher state cigarette taxes can be used to improve birth outcomes data on the outcomes of interest are taken from the 1989 1992 natality detail files generating a sample of roughly 10 5 million births the results suggest that smoking participation among pregnant women declines and average birth weights rise when excise taxes are increased these results can be used to form an instrumental variables estimate of the impact of smoking on birth weight this estimate is remarkably close to numbers from a random assignment clinical trial the smoking participation price elasticity is estimated to be 0 5

tax design in the presence of imperfect competition an example abstract this paper studies the effects upon price output and entry in an oligopolistic market induced by tax policy elsewhere in the economy the results derived are applied to a model of copying to find conditions for which subsidisation of the manufacturers of originals is welfare improving the critical factor is found to be the distribution of consumers tastes

measuring tax incidence an application to mortgage provision in the uk this paper derives measures of the average and marginal incidence of a tax or subsidy in imperfect competition in the context of the uk housing market we argue that one form of mortgage common in the uk but not elsewhere the endowment mortgage exists primarily because of the structure of taxation in the uk we estimate the determinants of the choice of the type of mortgage and the size of mortgage conditional on the choice using data from the building societies association on 43 000 individual mortgages taken out between 1985 and 1989 the estimated parameters are an input to the incidence measures results suggest that between 70 and 80 of the additional subsidy to endowment mortgages is captured by lenders rather than borrowers

cost pass through in differentiated product markets the case of u s processed cheese in this paper we estimate a mixed logit model for demand in the u s processed cheese market the estimates are used to determine pass through rates of cost changes under different behavioral regimes we find that under collusion the pass through rates for all brands fall between 21 and 31 while under nash bertrand price competition the range of pass through rates is between 73 and 103 the mixed logit model provides a more flexible framework for studying pass through rates than the logit model since the curvature of the demand functions depends upon the empirical distribution of consumer types

taxation and welfare in an oligopoly with strategic commitment this paper establishes comparative statics results for an oligopoly model with strategic commitment firms compete in two stages in the first stage firms decide on strategic cost reducing r d investment whereas they choose output in the second stage taking an excise tax subsidy as a shift parameter in the second stage game the short run as well as long run effects on output cost reducing r d investment and second best welfare will be examined the crucial role played by the strategic substitutability of outputs as well as cost reducing r d investments is clarified and a variant of the le chatelier samuelson principle in the authors game theoretic model is obtained copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

optimal two part tariffs for inputs the case of imperfect competition abstract traditionally the analysis of optimal two part tariffs has assumed that the regulated firm is selling directly to final consumers in this paper the authors take account of the fact that many of the utility s customers are firms which use the utility s output as an input in their own production process and then sell to final consumers the downstream firms are assumed to be imperfectly competitive and the optimal two part tariff is affected by the need to correct for the consequent divergence between price and marginal cost in the downstream industry

2 00 gas studying the effects of a gas tax moratorium there are surprisingly few estimates of the effects of sales taxes on retail prices especially at the firm level we consider the temporary suspension and subsequent reinstatement of the gasoline sales tax in illinois and indiana following a price spike in 2000 earlier laws set the timing of the reinstatements providing plausibly exogenous changes in the tax rates using a unique dataset of daily prices at the gas station level 70 of the tax suspension is passed on to consumers in the form of lower prices while 80 100 of the tax reinstatements are passed on to consumers some evidence suggests that these short run pass through estimates are smaller near the state borders with the tax reinstatements associated with relatively higher prices up to an hour s drive into neighboring states

should we resurrect tipp flottante if oil price booms again specific taxes as fuel consumer price stabilizers abstract as an answer to soaring oil prices stabilization mechanisms based on specific taxes such as the french tipp flottante have been discussed and introduced in some countries in early 2000s but then soon abandoned our contribution aims at analyzing the excise pass through and the cost shifting in a comprehensive european context to understand whether such a mechanism could actually reach its target our results show that on average fuel tax reductions are effective in stabilize consumer price but the measure is particularly costly for public budgets

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

are alcohol tax hikes fully passed through to prices evidence from alaska on 1 october 2002 the state of alaska increased taxes on malt beverages from 0 35 per gallon to 1 07 per gallon increased taxes on wine from 0 85 per gallon to 2 50 per gallon and increased taxes on distilled spirits from 5 60 per gallon to 12 80 per gallon the net effect is that the tax on a standard serving rose from about 3 cents for beer 2 cents for wine and 4 cents for spirits to a uniform tax of 10 cents per standard serving of each type of alcohol beverage this paper uses primary data on alcoholic beverage prices in alaska to study a very basic question what was the impact of the tax hikes on prices an alcohol tax hike is often viewed as a public health policy tool to discourage excessive alcohol consumption and alcohol related problems such as drunk driving the impact of a tax hike on alcoholic beverage prices is a key link in the chain of the causality from the tax to public health economic theory and previous empirical studies mainly of taxes on goods other than alcoholic beverages do not provide very much guidance on what to expect following a tax hike it is an empirical question to answer the question i conducted telephone surveys just before and a year after the tax hike of on premise and off premise alcohol retail establishments across alaska

oligopolistic competition and economic welfare a general equilibrium analysis of entry regulation and tax subsidy schemes abstract two contributions to the general equilibrium analysis of an oligopolistic economy with free entry are intended first we generalize the excess entry theorem to the effect that a marginal decrease in the number of oligopolistic firms from the free entry equilibrium level improves economic welfare second we explore the pareto improving tax subsidy schemes in an oligopolistic economy several self financing and pareto improving tax subsidy schemes will be identified in contrast with the preceding analysis by atkinson and stiglitz which focused on the long run incidence of corporate taxation we analyse the short run as well as long run welfare implications of various policies under generalized conditions

tax incidence under oligopoly a comparison of policy approaches abstract this paper presents a methodological approach for the analysis of tax incidence that encompasses familiar forms of taxation in a general and analytically convenient model in oligopolistic industries the performance of a tax depends on the sensitivity of the unit tax rate to changes in industry output output elastic tax schedules are less likely to be over shifted and have superior welfare properties relative to regulatory instruments that are less responsive to the equilibrium market quantity for revenue neutral tax reforms the finding of delipalla and keen 1992 that ad valorem taxes welfare dominate specific taxes under oligopoly is derived as a special case of this general result

how similar are country and sector responses to common shocks within the euro area abstract ever since the introduction of the euro there have been discussions about whether europe constitutes an optimal currency area the great recession and the european debt crisis have rekindled and intensified this debate heterogeneous country experiences have led to questioning the rationale for a common monetary policy in the absence of a common fiscal framework to cushion macroeconomic shocks in this paper we examine whether the impact of typical macroeconomic shocks at the european monetary union emu level varies across countries and sectors we follow furlanetto et al 2017 and estimate common euro area macroeconomic supply demand monetary investment and financial shocks using sign restrictions we calculate the impulse responses to these shocks at the country sector level using local linear projections and propose a measure for business cycle synchronisation based on the similarity of the responses we find varying degrees of heterogeneity across member countries responses to common emu shocks although the responses of economic sectors are themselves heterogeneous different sector decompositions across countries cannot explain the cross country heterogeneity contrary to e g bayoumi and eichengreen 1993 2017 we identify italy to be a core country in line with recent literature the level of heterogeneity was the most pronounced during the financial crisis compared to pre and post crisis periods

the impact of a soda tax on prices evidence from french micro data abstractbased on an original data set of more than 500 000 non alcoholic beverage price records we evaluate the impact on consumer prices of the soda tax an excise on drinks with added sugar or sweetener introduced in france in january 2012 we adopt a difference in differences approach and find that the tax was gradually passed through to the prices of the taxed beverages after 6 months of its introduction it was fully shifted to soda prices and almost fully shifted to the prices of fruit drinks while the pass through for flavoured waters was incomplete we also find that the pass through was heterogeneous across brands and retail groups

the future of value added tax in the european union the current vat regime in the eu introduced with the removal of fiscal frontiers in 1993 is explicitly transitional we consider the issues that arise in designing a definitive regime the two most widely canvassed options adoption of a clearing house or a shift to origin taxation are found wanting the paper develops an alternative strategy combining a harmonized rate of vat on transactions between firms both between and within member states with national discretion over rates applied to final sales this offers the prospect of a real improvement on current arrangements

secret reserve prices in a bidding model with a re sale option this paper presents an auction model in which the seller may choose not to sell in spite of receiving a bid above the announced reserve price such behavior is seen frequently in auctions yet would be suboptimal within most existing models here the seller uses resale to signal information about the object s value that could not be easily communicated via a reserve price announcement the model predicts that bids for reauctioned objects increase relative to initial bids and that on average prices of both reauctioned items and those sold at initial auction rise as delay in reauctioning increases copyright 1997 by american economic association

auctions with anticipated regret theory and experiment this paper demonstrates theoretically and experimentally that in first price auctions overbidding with respect to the risk neutral nash equilibrium might be driven from anticipated loser regret felt when bidders lose at an affordable price different information structures are created to elicit regret bidders know they will learn the winning bid if they lose loser regret condition or the second highest bid if they win winner regret condition or they will receive no feedback regarding the other bids bidders in loser regret condition anticipated regret and significantly overbid however bidders in the winner regret condition did not anticipate regret jel d44

excise tax avoidance the case of state cigarette taxes we conduct an applied welfare economics analysis of cigarette tax avoidance we develop an extension of the standard formula for the optimal pigouvian corrective tax to incorporate the possibility that consumers avoid the tax by making purchases in nearby lower tax jurisdictions to provide a key parameter for our formula we estimate a structural endogenous switching regression model of border crossing and cigarette prices in illustrative calculations we find that for many states after taking into account tax avoidance the optimal tax is at least 20 smaller than the standard pigouvian tax that simply internalizes external costs our empirical estimate that tax avoidance strongly responds to the price differential is the main reason for this result we also use our results to examine the benefits of replacing avoidable state excise taxes with a harder to avoid federal excise tax on cigarettes

subsidizing and taxing business procurement abstract this paper studies the effect of a subsidy or tax on a market where a downstream manufacturer uses a competitive tender to procure inputs from upstream suppliers subsidizing input production can result in input price decreases that are greater than the effective decrease in marginal costs that is overshifting occurs when the size of the subsidy is not too large the downstream firm can enjoy an increase in profits greater than the government expenditure on the subsidy a relatively weak sufficient condition for these results to hold is that suppliers earn a positive profit margin on the marginal unit sold before taking into account any subsidy payment stronger sufficient conditions tailored to each result are provided

a model of monopoly with strategic government intervention abstract a formal model of firm government interaction is developed in which the firm chooses the producer price and the government chooses the ad valorem tax rate to maximise revenue collection this game is then embedded as the second stage of a two stage game where in stage 1 the firm gets to choose its technology and therefore its cost function the main results of the paper are i to characterise the nash and stackelberg equilibria of the government firm game ii to demonstrate that strategic inefficiency i e the choice of high cost technologies when lower cost options are available is pervasive in these models whenever the government uses ad valorem taxes and iii to show that if the government s choice between ad valorem tax and specific or per unit tax is endogenised then in a perfect equilibrium the government will in fact choose the ad valorem system

incidence of federal and state gasoline taxes the federal specific gasoline tax falls equally on consumers and wholesalers whereas state specific taxes fall almost entirely on consumers the consumer incidence of state taxes is greater in states that use relatively little gasoline

carbon taxation and market structure a cge analysis for russia abstract russia is one of the world s major sources of carbon based energy as well as one its most intensive users introducing carbon taxes can lead to a reduction in emissions and encourage investment in energy efficiency we investigate the economic effects of carbon taxes on the russian economy under perfect competition and a cournot oligopoly in output markets the main findings are i substituting carbon taxes for labour taxes can yield a strong double dividend in russia however welfare gains strongly depend on the labour supply elasticity and elasticities of substitution between capital labour and energy ii under the assumption of a cournot oligopoly with homogenous products and symmetric firms in the markets for natural gas petroleum and chemical products metals and minerals welfare costs of the environmental tax reform can be higher than under perfect competition this is because introducing carbon taxes leads to a reduction in already sub optimal output thereby exacerbating pre existing distortions arising from imperfect competition iii furthermore increases in energy costs can result in higher mark ups in some markets because of less competition resulting from firms exit

from each according to his surplus equi proportionate sharing of commodity tax burdens abstract this paper examines the incidence of commodity taxes finding that when demand and marginal cost schedules are linear the burden of commodity taxation is distributed between buyers and sellers so that each suffers the same percentage reduction in pre tax surplus this equi proportionate reduction in surplus is the outcome of commodity taxes set at any rate and is unaffected by relative demand and supply elasticities hence when demand and marginal cost schedules are linear commodity taxes resemble flat rate taxes imposed on market surplus similar results apply to nonlinear schedules within certain ranges

alcohol demand and taxation under monopoly and oligopoly in south india in the 1970s abstract our first objective is the investigation of the determinants of recorded demand for alcohol and particularly arrack in terms of price and income elasticities taxation and household characteristics second we develop an analysis of some simple theoretical aspects of the revenue system in karnataka involving the auction of the monopoly right to sell legally in a district this leads to an examination of the theory of taxation in spatial and non spatial oligopoly third we combine these different elements to comment on policy in karnataka we hope to demonstrate some techniques and provide insights which can be productively used for a range of important problems in taxation and demand estimation for developing countries

optimal fiscal regime in a spatial duopoly abstract we investigate a horizontally differentiated duopoly in which a public authority can either tax or subsidize firms in order to induce duopolists to choose the socially optimal locations the policy proposed here is such that welfare maximization is achieved by directly affecting firms location without explicitly modifying their price behavior

optimal taxes and the structure of preferences if optimal tax theory is to be the basis for calculating tax rates a close understanding is required of the relationship between the structure of preferences and the configuration of optimal tax rates otherwise hypotheses chosen by the econometrician for practical convenience may completely determine the results independently of measurement this paper explores the relationship between various types of separability particularly weak and implicit separability and optimal tax rates in the various models discussed in the literature the use of distance functions and the antonelli matrix provides a significant unification of previously disparate results in the final analysis optimal tax theory should be the basis for actual calculation of tax rates although recently there have been great advances in theoretical results and in our understanding of their meaning we are still some way from a working knowledge of whether uniform commodity taxes are in practice optimal or if not which commodities should be discriminated against present theoretical formulae do not yield clear cut results except in special cases and it has recently become clear that optimal rates depend crucially on the detailed structure of consumer preferences for example atkinson and stiglitz 3 show that with an optimal nonlinear income tax discriminatory commodity taxes are only necessary to the extent that individual commodities are not weakly separable from leisure more recently deaton 6 has shown that a similar result holds for what is perhaps the most interesting of the standard models that where there are many consumers and only a linear income tax and proportional commodity taxes are allowed in this case separability between goods and leisure together with linear engel curves for goods removes the need for differential commodity taxation in consequence nothing can be learned about commodity taxes from consumer demand studies in which commodity demands are explained conditionally on total expenditure and commodity prices and which assume linear engel curves all such studies require separability from leisure as a maintained hypothesis and so are consistent with uniform commodity taxation these results suggest that the prospects for meaningful empirical calculations of tax rates are bleak econometricians estimating commodity demand and labor supply equations make generous use of separability assumptions to enable estimation at all in consequence it is likely that empirically calculated tax rates based on econometric estimates of parameters will be determined in structure not by the measurements actually made but by arbitrary untested and even unconscious hypotheses chosen by the econometrician for practical convenience to remedy this situation and as a prelude to fruitful empirical work it is necessary to have a more explicit understanding of how preference structure affects optimal tax rates such is the object of this paper three different

oligopoly and welfare a unified presentation with applications to trade and development abstract we develop a unified sequence of models to examine the determinants of price output profitability and concentration for different kinds of oligopolistic market we relate various magnitudes of significance to judges of welfare and to policy makers such as consumer surplus profit or added benefits of employment or trade surplus to observable magnitudes such as the size and concentration of the market it emerges that various appropriately formulated herfindahl indices are useful in several of these relations we attempt to present results in a way that is useful for empirical investigations and pay particular attention to applications in trade and development

who pays cigarette taxes the impact of consumer price search abstract we conduct an empirical study of the impact of consumer price search on the shifting of cigarette excise taxes to consumer prices we use novel data on the prices that smokers report paying and document substantial price dispersion we find that cigarette taxes are shifted at lower rates to carton buyers and especially smokers who buy cartons of cigarettes in a state other than their state of residence we also find evidence that taxes are shifted at somewhat lower rates to the prices paid by heavier smokers and at somewhat higher rates to the prices paid by smokers of light cigarettes

corrective tax and subsidy policies in economies with bertrand competition abstract this paper shows how we can correct market failure due to imperfect competition by using taxes and subsidies the analysis is carried out at the general equilibrium level and the importance of objective demand curves is stressed the main conclusions are first it is possible to tax the economy back to the walrasian equilibrium by using linear taxes and subsidies second the welfare theorem holds in an imperfectly competitive economy with corrective taxes and subsidies third a competitive equilibrium can also be achieved by the use of ad valorem taxes and specific output subsidies

multi round procurement auctions with secret reserve prices theory and evidence when a secret reserve price is used in an auction the auctioneer cannot guarantee that the good can be sold out at the auction and can reauction the unsold objects in the next round motivated by this interesting feature observed in the procurement auctions organized by the indiana department of transportation we construct a dynamic bidding model in multi round procurement auctions with secret reserve prices and evaluate how the release of the auctioneer s reserve price affects bidders bidding behavior and the auctioneer s expected payment our theoretical model predicts that the equilibrium bids uniformly decline over stages and the numerical analysis of our model indicates that hiding the reserve price may be better than announcing it for the auctioneer under some specifications of underlying distributions we develop an empirical model with bidders discount factor equal to zero to recover the unknown structural parameters and to conduct counterfactual analyses copyright 2008 john wiley sons ltd

implications of a sugar sweetened beverage ssb tax when substitutions to non beverage items are considered abstract using the 2006 homescan panel we estimate the changes in energy fat and sodium purchases resulting from a tax that increases the price of sugar sweetened beverages ssbs by 20 and the effect of such a tax on body weight in addition to substitutions that may arise with other beverages we account for substitutions between ssbs and 12 major food categories our main findings are that the tax would result in a decrease in store bought energy of 24 3 kcal per day per person which would translate into an average weight loss of 1 6 pounds during the first year and a cumulated weight loss of 2 9 pounds in the long run we do not find evidence of substitution to sugary foods and show that complementary foods could contribute to decreasing energy purchases despite their significantly lower price elasticity the tax has a similar effect on calories for the largest purchasers of ssbs

planes ships and taxes charging for international aviation and maritime emissions international aviation and maritime transport account for a significant and growing share of global carbon emissions yet they are not only excluded from the kyoto agreement and all current carbon pricing schemes but do not even pay fuel excises of the type standard for other transport activities moreover each sector benefits from preferential tax treatment failure to charge vat on international aviation and the application of tonnage tax regimes rather than the normal corporate tax in maritime this paper considers the design of fuel charges in these sectors to address these distortions and quantifies their impact on emissions revenue and welfare showing amongst other things that the gain from offsetting the pre existing tax distortions may be as significant as those from reducing emissions it shows too how compensation schemes can be designed to protect the poorest countries a key ingredient in the politics of the issue given the practical need for wide applicability of such charges the real challenge is to amass the degree of international cooperation required especially strong for maritime failure of which to some degree explains their current under taxation and unsurprisingly to decide who gets the money technically these charges should if anything be rather easy to implement michael keen ian parry and jon strand

aftershocks of monetary unification hysteresis with a financial twist abstract in the 1990s it was widely agreed that neither europe nor the united states satisfied the conditions for constituting an optimum currency area although the u s came closer bayoumi and eichengreen 1993 moderating this concern about europe was the fact that it was possible to distinguish a regional core and periphery using updated data we confirm that the united states remains closer to an optimum currency area more intriguingly the euro area shows striking changes in correlations and responses we interpret these as reflecting hysteresis with a financial twist in which the financial system causes aggregate supply and demand shocks to reinforce each other an implication is that the euro area needs vigorous coordinated regulation of its banking and financial systems by a single supervisor that monetary union without banking union will not work

fuel tax incidence and supply conditions abstract the incidence of taxes on consumers and producers plays a central role in evaluating energy tax policy yet the literature testing the main predictions of the tax incidence model is sparse in this paper we examine the pass through rate of state gasoline and diesel taxes to retail prices and importantly we estimate the dependence of pass through on factors constraining the gasoline and diesel supply chains we consider several factors that alter the elasticity of supply including within state heterogeneity in gasoline content requirements refinery capacity utilization inventory constraints and variation in the demand for untaxed uses of diesel in general we find that in periods of time when the supply chain is constrained and the constraint is plausibly unrelated to shifts in demand the pass through rate of fuel taxes declines we describe several potential implications for tax policy including tax breaks during peak driving season and during times of supply disruptions such as after major hurricanes

on absolute auctions and secret reserve prices from a theory viewpoint the use of auctions with zero public reserve prices also called absolute auctions or of auctions with secret reserve prices is somewhat puzzling despite being common by allowing that buyers differ in their processing of past data regarding how the participation rate varies with the auction format and how reserve prices are distributed when secret we show in a competitive environment that these auction formats may endogenously emerge we also analyze how buyers with various sophistications and sellers with various costs sort into the different formats thereby offering a range of testable predictions alternative approaches are reviewed

commodity taxation and imperfect competition a note on the effects of entry abstract this paper looks at the effects of allowing the number of firms to vary in seade s model of oligopoly and taxation we show that the normative and positive consequences of a specific commodity tax are affected by entry in significant ways

tax incidence with strategic firms in the soft drink market abstract because soft drink sd consumption is considered to be a contributor to the epidemic of obesity there is a growing interest in evaluating the impact on sd consumption of alternative tax policies in this paper we propose a methodology to evaluate the impact of taxation of a food market taking into account the strategic price response of both manufacturers and retailers we apply this methodology to the french sd market and simulate the impacts of ad valorem and excise taxes we find that firms behave differently when facing an ad valorem tax or an excise tax an excise tax is overshifted to consumer prices while an ad valorem tax is undershifted to consumer prices we find that an excise tax based on the sugar content of sd is the most effective at reducing sd consumption our results also indicate that ignoring strategic pricing by firms leads to misestimations of the impact of taxation by between 15 and 40 depending on the products and the tax implemented in the short term that is ignoring positive long term health effects a 9 cents l excise tax has a small negative welfare effect about 1 person year

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

ramsey tax rules for economies with imperfect competition abstract this paper derives optimal commodity tax rules for a general equilibrium model with imperfect competition to achieve this functions are constructed that describe the effects of taxation upon the equilibrium prices and profit levels of imperfectly competitive industries the use of these functions allows existing tax rules to be generalised to accommodate imperfect competition

estimating the effect of tax reform in differentiated product oligopolistic markets abstract the incidence of taxation has been extensively discussed in the public finance literature but mainly within a competitive market setting or within a homogenous good cournot type oligopoly in a differentiated product oligopoly the effect of taxation can be more complex as the rate of taxation may affect not only the prices but also the profile and quality of products that are sold in the market in this paper we examine the effects of changing tax regimes in a differentiated product oligopoly in order to illustrate our approach we employ data from one such market the automobile market in israel

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

vertical tax competition and consumption externalities in a federation with lobbying abstract we consider a federation with two layers of government in which leviathan policy makers levy an excise tax on a consumption good that generates a negative externality and that is produced in an imperfectly competitive market when both layers of government are allowed to tax policy choices are affected also by vertical tax competition in this setting tax policy in general is not efficient we then examine how special interest groups may influence tax policy by lobbying the policy makers we find that depending on market structure and on the level of the externality lobbying can improve efficiency and that tax base sharing by two layers of government can be more efficient than taxation by a single layer

bidding off the wall why reserve prices may be kept secret abstract this note shows by means of an example that in a common value auction a seller with a random reservation value can increase her ex ante expected profits by following a policy of conducting an auction in which her reserve price is kept secret compared to an auction in which the reserve price is announced by keeping the reserve price secret the seller is able to encourage greater participation from the bidders and can therefore increase the linkage of the price paid to the value of the purchased object journal of economic literature classification numbers d82 d44

do coffee roasters benefit from high prices of green coffee abstract the german coffee industry has repeatedly made the puzzling statement that it would prefer higher prices of green coffee its main input likewise it supported the maintenance of the coffee tax in this paper an oligopoly model with differentiated products is used to illustrate the possibility of profit raising cost increases the relationship between prices and costs of roasted coffee in germany is estimated and the hypothesis of overshifting is tested in addition the demand for coffee is studied however the empirical analysis does not confirm that increasing costs lead to higher profits alternative explanations for the coffee industry s statements based on long term considerations are also discussed