Working Paper: NBER ID: w1088
Authors: Michael L. Katz; Harvey S. Rosen
Abstract: In this paper we analyze taxation using the conjectural variations model of oligopoly. We demonstrate the way in which the incidence of a tax depends upon the pattern of firm interaction. The results obtained have important implications for the controversy surrounding the question of whether a tax oncorporate income can be over-shifted. We also study normative aspects of taxation. The focus here is on the errors that can arise in excess burden calculations when incorrect assumptions on market structure are made.
Keywords: oligopoly; tax incidence; corporate income tax; excess burden
JEL Codes: H25; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax Imposition (H22) | Industry Profits (D33) |
| Tax Increase (H29) | Output Reduction (C67) |
| Output Reduction (C67) | Before-Tax Profits Increase (H29) |
| Conjectural Variation < 1 (C29) | Competitive Behavior (L13) |
| Conjectural Variation = 1 (C29) | Monopolistic Behavior (L12) |