OPTIMAL TAXATION WITH IMPERFECT COMPETITION AND AGGREGATE RETURNS TO SPECIALIZATION | Zendy

CotoMartínez Javier | Zendy; SánchezLosada Fernando | Zendy; Garriga Carlos | Zendy

AI Assistant Blog Pricing

Home ZAIA Blog

Open Access

OPTIMAL TAXATION WITH IMPERFECT COMPETITION AND AGGREGATE RETURNS TO SPECIALIZATION

Author(s) -

CotoMartínez Javier,

SánchezLosada Fernando,

Garriga Carlos

Publication year - 2007

Publication title -

journal of the european economic association

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 7.792

H-Index - 93

eISSN - 1542-4774

pISSN - 1542-4766

DOI - 10.1162/jeea.2007.5.6.1269

Subject(s) - economics , imperfect competition , productivity , market power , imperfect , monetary economics , optimal tax , government (linguistics) , total factor productivity , capital (architecture) , microeconomics , competition (biology) , macroeconomics , history , ecology , linguistics , monopoly , philosophy , archaeology , biology

In this article 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 number 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. (JEL: H21, H30, E62)

The content you want is available to Zendy users.

Already have an account? Click here to sign in.

Having issues? You can contact us here

Accelerating Research