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Relative Efficiency of AD Valorem and Unit Taxes: The Case of Endogenous Quality

Name: Relative Efficiency of AD Valorem and Unit Taxes: The Case of Endogenous Quality
Creator: Liqun Liu
Keywords: 0502 economics and business, 05 social sciences, 8. Economic growth

descriptionPublicationkeyboard_double_arrow_right Article 01 May 2003Publisher:SAGE PublicationsJournal:Public Finance Review, volume 31, pages 291-301 (issn: 1091-1421, eissn: 1552-7530,

Authors: Liqun Liu;

doi: 10.1177/1091142103031003004

Relative Efficiency of AD Valorem and Unit Taxes: The Case of Endogenous Quality

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Abstract

This article studies the relative efficiency of unit and ad valorem taxes in a competitive market in which the quality of product is endogenous. The author finds that the relative efficiency of these two taxes depends on exactly how individuals value the quality of a product. Specifically, the unit tax welfare dominates the ad valorem tax in the “casket” case and the “full-price” case, whereas the ad valorem tax welfare dominates the unit tax in the “lightbulb” case.

Related Organizations

The University of Texas System
United States

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