EconPapers    
Economics at your fingertips  
 

Product diversity, demand structures and optimal taxation

Vivien Lewis () and Roland Winkler ()

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: This paper studies optimal taxation in a general equilibrium model with endogenous entry. We compare the constant elasticity of substitution (CES) model to three alternative demand structures: oligopolistic competition in prices, oligopolistic competition in quantities, and translog preferences. Our economy is characterized by two distortions: a labor distortion due to the misalignment of markups on goods and leisure, and an entry distortion due to the misalignment of the consumer surplus effect and the profit destruction effect of entry. The two distortions interact in determining the wedge between the market-driven and optimal level of product diversity. We show how optimal labor and entry taxes depend upon the prevailing demand structure, the nature and size of entry costs, and the degree of substitutability between goods.

Date: 2013-11
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
https://lirias.kuleuven.be/bitstream/123456789/425224/1/DPS1322.pdf

Related works:
Journal Article: PRODUCT DIVERSITY, DEMAND STRUCTURES, AND OPTIMAL TAXATION (2015) Downloads
Working Paper: Product Diversity, Demand Structures and Optimal Taxation (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces13.22

Access Statistics for this paper

More papers in Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven
Bibliographic data for series maintained by library EBIB ().

 
Page updated 2022-01-14
Handle: RePEc:ete:ceswps:ces13.22