Strong Substitutes and Tax Reform: A Further Interpretation

Masatoshi Yamada

International Economic Review, 1996, vol. 37, issue 4, 997-99

Abstract: A decade ago A. Hatta and J. Haltiwanger (1986) gave a theoretical foundation for the intuitive tax policy recommendation that if two strong substitutes have different ad valorem tax rates, lessening the difference between their tax rates improves consumer's welfare. This note demonstrates that a simpler and possibly more practical assumption of tax-revenue substitutes is sufficient to uphold the Hatta-Haltiwanger theorem. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1996
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