Commodity Tax Structure Under Uncertainty in a Perfectly Competitive Market

23 Pages Posted: 14 Feb 2011

See all articles by Laszlo Goerke

Laszlo Goerke

University of Trier - Institute of Labour Law and Industrial Relations in the European Union; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: February 14, 2011

Abstract

In a partial equilibrium setting without price uncertainty, the balanced-budget substitution of an ad valorem tax on output for a specific (unit) tax can enhance welfare in imperfectly competitive markets and is without impact in a competitive world. This paper demonstrates that a substitution of this kind can also increase expected output and welfare in a competitive market characterised by uncertainty about the commodity price, if firms can respond to the revelation of demand conditions by altering output.

Keywords: ad valorem tax, commodity taxation, perfect competition, uncertainty, unit tax

JEL Classification: H210, H250

Suggested Citation

Goerke, Laszlo, Commodity Tax Structure Under Uncertainty in a Perfectly Competitive Market (February 14, 2011). CESifo Working Paper Series No. 3339, Available at SSRN: https://ssrn.com/abstract=1761208

Laszlo Goerke (Contact Author)

University of Trier - Institute of Labour Law and Industrial Relations in the European Union ( email )

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