Producers Lose: The Relative Percentage Reductions in Surplus due to an Ad Valorem Commodity Tax  

Oleh:

Trandel, Gregory A.

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: Public Finance Review vol. 27 no. 1 (Jan. 1999), page 96-104.
Fulltext: 96PFR271.pdf (60.68KB)

Isi artikel

In traditional studies, focusing on price effects, changes in demand and cost parameters cause a tax’s incidence to shift between producers and consumers. Recent incidence results focus on changes in producer and consumer surpluses; they show that with linear demand and marginal cost, a specific commodity tax causes each surplus to fall by the same percentage. This note shows that imposing an ad valorem tax on a noncompetitive market (again assuming linearity) always causes producer surplus to fall by a larger percentage than does consumer surplus. As the tax rate rises, the percentage reductions in surplus move toward equality.

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