The welfare comparison of corrective ad valorem and unit taxes under monopolistic competition

The ad valorem versus unit tax debate has traditionally emphasized tax yield. On this criterion, ad valorem taxes outperform unit taxes in terms of welfare for a wide range of imperfect competition settings including Dixit–Stiglitz monopolistic competition. However, in a number of policy fields such as environmental, health, and trade economics, policy makers use taxes to reduce the production/consumption volume in an industry, i.e., to correct an externality rather than to improve tax yield. This paper compares the two tax instruments with respect to equal corrective effect in a Dixit–Stiglitz setting with love of variety, entry, exit, and redistribution of tax revenues. We find that unit taxes lead to more firms in the industry, less output per firm, less tax revenue, but higher welfare compared to ad valorem taxes.      

Stranded Assets: How Policy Uncertainty affects Capital,Growth, and the Environment

Environmental and Resource Economics - The paper considers stochastic environmental policy and its effects on the environment, portfolio composition, and economic growth. Capital accumulation...     

Students’ knowledge of emerging technology and sustainability through a design activity in technology education

International Journal of Technology and Design Education - The purpose of this study is to explore whether, and if so how, a design activity could encourage students to express and develop...