Optimal taxation with imperfect competition and aggregate returns to specialization
By: by Javier Coto-Martínez, Carlos Garriga, and Fernando Sánchez-Losada
Contributors: Garriga, Carlos; Sánchez-Losada, Fernando; Federal Reserve Bank of St. Louis
Series: Working paper -- 2007-036A; Working paper (Federal Reserve Bank of St. Louis : Online) -- 2007-036A.
Publisher: Federal Reserve Bank of St. Louis
Published: 2007
Place of publication: St. Louis, Mo.]
Language: eng
Format: [electronic resource] /
Description: "In this paper we explore the proposition that in economies with imperfect competitive markets the optimal capital income tax is negative and the optimal tax on firms profits is confiscatory.  We show that if the total factor productivity as well as the measure of firms or varieties are endogenous instead of fixed, then the optimal fiscal policy can lead to different results.  The government faces a trade-off between the fixed costs that society pays for the introduction of a new firm and the productivity gains associated to the introduction of a new variety.  We find that the optimal fiscal policy depends on the relationship between the index of market power, the returns to specialization, and the government's ability to control entry"--Federal Reserve Bank of St. Louis web site.
Notes: Title from PDF file as viewed on 9/10/2007.

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