The optimal tax on antebellum US cotton exports |
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Authors: | Douglas A. Irwin |
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Affiliation: | Department of Economics and NBER, Dartmouth College, Hanover, NH 03755, USA |
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Abstract: | The US produced about 80% of the world’s cotton in the decades prior to the Civil War. How much monopoly power did the US possess in the world cotton market and what would have been the effect of an optimal export tax? This paper estimates the elasticity of foreign demand for US cotton exports and uses the elasticity in a simple partial equilibrium model to calculate the optimal export tax and its effect on prices, trade, and welfare. The results indicate that the export demand elasticity for US cotton was about −1.7 and that the optimal export tax of about 50% would have raised US welfare by about $10 million, about 0.3% of US GDP or about 1% of the South’s GDP. |
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Keywords: | Optimal export tax Cotton Export demand |
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