On the Neutrality of Profit Taxation in a Mixed Oligopoly |
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Authors: | Horn-In Kuo Cheng-Hau Peng K L Glen Ueng |
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Institution: | 1. Department of International Business, Ming Chuan University, Taipei, Taiwan;2. Department of Economics, Fu Jen Catholic University, New Taipei City, Taiwan;3. Department of Public Finance, National Chengchi University, Taipei, Taiwan |
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Abstract: | This paper investigates the neutrality of profit taxation in a mixed oligopoly where one (partially) public firm competes with private firms. We find that the neutrality of a profit tax is robust under a general cost and a general demand function as long as the degree of privatization is endogenously determined. This result is also true when product heterogeneity is considered under both Cournot and Bertrand competition. By contrast, if the degree of privatization is exogenously given, the profit tax neutrality holds only in the cases where the public firm is fully privatized or fully state-owned; otherwise, the neutrality breaks down. |
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Keywords: | Mixed oligopoly Privatization Profit tax neutrality |
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