Revenue-Neutral Tax Reform in Vertically Related Markets

Kenji Fujiwara ()
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Kenji Fujiwara: School of Economics, Kwansei Gakuin University

No 207, Discussion Paper Series from 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.

Keywords: Final Goods; Intermediate Goods; Oligopoly; Monopolistic Competition; Tax Incidence; Welfare (search for similar items in EconPapers)
JEL-codes: D43 H21 H22 L13 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2020-04
New Economics Papers: this item is included in nep-acc, nep-com, nep-pbe and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:207

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