Product Diversity, Demand Structures and Optimal Taxation

Konferenzbeitrag

This paper studies optimal taxation in a general equilibrium macro 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: Macro Aspects of Optimal Taxation ; No. B07-V2

Classification and Topics

• Classification: Wirtschaft ; Investment; Capital; Intangible Capital; Capacity ; Policy Objectives; Policy Designs and Consistency; Policy Coordination ; Taxation and Subsidies: Efficiency; Optimal Taxation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Winkler, Roland ; Lewis, Vivien
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/100590
• Last update: 10.03.2025, 11:43 AM CET