Working Paper: NBER ID: w9415
Authors: Gilbert E. Metcalf; George Norman
Abstract: We examine the interplay between market structure and the form that commodity taxation should take in a world in which firms produce differentiated products and so are able to exert some degree of market power. Our analysis takes explicit account of two important recent developments that carry significant implications for market structure and so for the appropriate design and effectiveness of commodity taxation: market deregulation and technological change. In the presence of price discrimination, we find that tax policy loses much of its effectiveness at serving as a substitute for direct regulation. Moreover, in cases where taxes can influence market structure, subsides rather than taxes may be required to achieve optimum market structure.
Keywords: No keywords provided
JEL Codes: D43; H20; H21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax policy (H20) | market structure (D49) |
| price discrimination (D40) | effectiveness of commodity taxes (H29) |
| market power (L11) | market structure (D49) |
| subsidies (H20) | optimal market outcomes (D41) |
| pricing policies (L11) | market structure (D49) |
| market entry decisions (F23) | tax policy (H20) |