The optimal export tax for a primary commodity in a vertical market |
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Authors: | Ying Lin Henry W Kinnucan |
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Institution: | 1. School of Economics and Finance, Xi'an Jiaotong University, 74 W Yanta Road, Xi'an, China;2. Department of Agricultural Economics and Rural Sociology, Auburn University, Auburn, Alabama |
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Abstract: | The conventional formula for the optimal export tax (derived from a partial equilibrium model that ignores importers’ welfare) is extended to include the deadweight loss to the domestic economy associated with the tax. Applying the extended formula to the tax Russia imposes on its exports of logs, results suggest ignoring the marketing channel causes the optimal export tax for a primary commodity to be understated. The degree of understatement increases as the supply of logs and processing/marketing inputs become less price elastic, and as buyer and seller power in the downstream (lumber) industry increases. For plausible values of model parameters, however, the degree of understatement is modest, less than 19%. |
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Keywords: | export tax forest trade imperfect competition Muth-type model optimal tax vertical markets |
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