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Special-Interest Lobbying and Endogenous Commodity Taxation

Avinash Dixit ()

Eastern Economic Journal, 1996, vol. 22, issue 4, 375-388

Abstract: This paper offers an initial exploration of a positive counterpart to the normative Ramsey-Diamond-Mirrlees theory of optimal commodity taxation. A model of lobbying for taxes and subsidies on production and consumption in an open economy is constructed, generalizing the Crossman-Helpman model of protection. It is found that the equilibrium of the lobbying process generally violates aggregate production efficiency, contrary to the normatively optimal policy. The outcome also differs markedly from the model of lobbying for protection: the equilibrium policy involves mostly production subsidies, not import tariffs.

Keywords: Equilibrium; Lobbying; Subsidies; Taxation; Taxes (search for similar items in EconPapers)
JEL-codes: D72 H25 (search for similar items in EconPapers)
Date: 1996
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Eastern Economic Journal is currently edited by Cynthia A. Bansak, St. Lawrence University and Allan A. Zebedee, Clarkson University

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Handle: RePEc:eej:eeconj:v:22:y:1996:i:4:p:375-388