Failure of Ad Valorem and Specific Tax Equivalence under Uncertainty

Laszlo Goerke, Frederik Herzberg and Thorsten Upmann ()

No 201205, IAAEU Discussion Papers from Institute of Labour Law and Industrial Relations in the European Union (IAAEU)

Abstract: Applying a framework of perfect competition under uncertainty, we contribute to the discussion of whether or not ad valorem taxes and specific taxes are equivalent. While this equivalence holds without price uncertainty, we show that ad valorem taxes and specific taxes are “almost never” equivalent in the presence of uncertainty if we demand equivalence to hold pathwise. Since we obtain this result under perfect competition, our analysis also provides a further rationale for why the equivalence must fail under imperfect competition.

Keywords: ad valorem taxes and specific taxes; revenue neutrality; price uncertainty; concept of pathwise neutrality (search for similar items in EconPapers)
JEL-codes: H20 H21 H61 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-mic and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Failure of ad valorem and specific tax equivalence under uncertainty (2014)
Working Paper: Failure of Ad Valorem and Specific Tax Equivalence under Uncertainty (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:iaa:dpaper:201205

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