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Maximum‐revenue versus Optimum‐welfare Export Taxes: a Delegation Game

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  • Roger Clarke
  • David R. Collie

Abstract

In the Eaton and Grossman (1986) Bertrand duopoly model of strategic export taxes, both countries may be better off if they both delegate to policymakers who maximize tax revenue rather than welfare. However, both countries delegating to policymakers who maximize tax revenue is not a Nash equilibrium unless the degree of product substitutability is sufficiently high. For a wide range of values for the degree of product substitutability, the game is a prisoner's dilemma where both countries are better off delegating to policymakers who maximize tax revenue but both will delegate to policymakers who maximize welfare in the Nash equilibrium.

Suggested Citation

  • Roger Clarke & David R. Collie, 2008. "Maximum‐revenue versus Optimum‐welfare Export Taxes: a Delegation Game," Review of International Economics, Wiley Blackwell, vol. 16(5), pages 919-929, November.
    • Handle: RePEc:bla:reviec:v:16:y:2008:i:5:p:919-929
    DOI: 10.1111/j.1467-9396.2008.00757.x
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    References listed on IDEAS

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    1. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(2), pages 383-406.
    2. David Collie & Roger Clarke, 2006. "Export Taxes under Bertrand Duopoly," Economics Bulletin, AccessEcon, vol. 6(6), pages 1-8.
    3. Panagariya, Arvind & Schiff, Maurice, 1994. "Can revenue maximizing export taxes yield higher welfare than welfare maximizing export taxes?," Economics Letters, Elsevier, vol. 45(1), pages 79-84, May.
    4. Collie, David, 1991. "Optimum Welfare and Maximum Revenue Tariffs under Oligopoly," Scottish Journal of Political Economy, Scottish Economic Society, vol. 38(4), pages 398-401, November.
    5. Roger Clarke & David Collie, 2003. "Product differentiation and the gains from trade under Bertrand duopoly," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 658-673, August.
    6. Roger Clarke & David R. Collie, 2006. "Optimum‐Welfare And Maximum‐Revenue Tariffs Under Bertrand Duopoly," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(3), pages 398-408, July.
    7. Bruno Larue & Jean–Philippe Gervais, 2002. "Welfare–maximizing and revenue–maximizing tariffs with a few domestic firms," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 35(4), pages 786-804, November.
    8. Piermartini, Roberta, 2004. "The role of export taxes in the field of primary commodities," WTO Discussion Papers 4, World Trade Organization (WTO), Economic Research and Statistics Division.
    9. Yilmaz, Kamil, 1999. "Optimal export taxes in a multicountry framework," Journal of Development Economics, Elsevier, vol. 60(2), pages 439-465, December.
    10. Toru Kikuchi, 1998. "Strategic Export Policy in a Differentiated Duopoly: A Note," Open Economies Review, Springer, vol. 9(4), pages 315-325, October.
    11. David Collie, 1997. "Delegation and Strategic Trade Policy," International Economic Journal, Taylor & Francis Journals, vol. 11(3), pages 35-46.
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    Cited by:

    1. David R. Collie & Vo Phuong Mai Le, 2010. "Antidumping Regulations: Anti‐Competitive and Anti‐Export," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 796-806, November.
    2. Yoon, Jeong & Choi, Kangsik, 2018. "Why do export subsidies still exist? R&D and output subsidies," Japan and the World Economy, Elsevier, vol. 45(C), pages 30-38.
    3. Leonard Wang & Jen-yao Lee & Chin-shu Huang, 2012. "Maximum-Revenue and Optimum-Welfare Tariffs in International Mixed Duopoly: Does the Order of Firms’ Move Matter?," Journal of Industry, Competition and Trade, Springer, vol. 12(3), pages 273-283, September.
    4. Vijay Mohan & Bharat Hazari, 2012. "Tax Policy When Countries Compete for Third Market Exports," Pacific Economic Review, Wiley Blackwell, vol. 17(5), pages 708-728, December.
    5. Davidson, Sinclair & Mohan, Vijay & Potts, Jason, 2020. "Location, taxation and governments: An exchange theory of intellectual property," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 266-283.
    6. Anomita Ghosh & Rupayan Pal, 2017. "Welfare Ranking of Alternative Export Taxes Revisited," Economics Bulletin, AccessEcon, vol. 37(2), pages 1033-1044.
    7. Anomita Ghosh & Rupayan Pal, "undated". "Welfare ranking of alternative export tariffs revisited," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2015-009, Indira Gandhi Institute of Development Research, Mumbai, India.
    8. Wang, Leonard F.S. & Lee, Jen-Yao, 2012. "Domestic entry, optimum-welfare and maximum-revenue tariffs," Research in Economics, Elsevier, vol. 66(1), pages 106-109.
    9. Stefan Csordás, 2010. "A Public Choice Approach to Strategic and Nonstrategic Environmental Policy," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 1001-1011, November.

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