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Revenue-Neutral Tax Reform in Vertically Related Markets

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  • Kenji Fujiwara

    (School of Economics, Kwansei Gakuin University)

Abstract

This paper examines the effects of a tax reform when final goods are produced in an oligopoly and intermediate goods are produced in monopolistic competition. In particular, we address the effect of a shift from upstream to downstream taxation that leaves government revenue unchanged. This tax reform raises the consumer and producer prices of final goods, lowers the demand price of intermediate goods, and has no effect on the producer price of intermediate goods. Finally, we find that welfare improves with this tax reform.

Suggested Citation

  • Kenji Fujiwara, 2020. "Revenue-Neutral Tax Reform in Vertically Related Markets," Discussion Paper Series 207, School of Economics, Kwansei Gakuin University.
    • Handle: RePEc:kgu:wpaper:207
    as

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    File URL: http://192.218.163.163/RePEc/pdf/kgdp207.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Final Goods; Intermediate Goods; Oligopoly; Monopolistic Competition; Tax Incidence; Welfare;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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