Tax and Subsidy Incidence Equivalence Theories: Experimental Evidence from Competitive Markets

نویسنده

  • Bradley J. Ruffle
چکیده

A basic tenet in elementary microeconomics is tax incidence equivalence. This tenet holds that the burden of a unit tax on buyers and sellers is independent of who actually pays the tax. Recently, the empirical validity of tax incidence equivalence has been brought into question. In this paper, using competitive laboratory markets, I test both tax incidence equivalence and an analogous theorem I refer to as subsidy incidence equivalence. For sufficiently large markets, the results show very strong support for both theories. In smaller markets in which competitive forces are weaker and relative bargaining strengths may play a role, the evidence for tax incidence equivalence is weaker as minor price discrepancies may persist between markets. keywords: tax incidence equivalence, subsidy, competitive markets, experimental economics ∗I thank Ted Bergstrom and Avia Spivak for comments. I also thank my research assistants, Inna Agroskin, Gil Attia, Michal Livne, Iris Mini, Lilach Sudak, Tsafi Vana and Liat Winner, as well as Noam Green for programming the software for the transaction graphs. Financial support from BenGurion University is gratefully acknowledged. The incidence of any remaining shortcomings must be fully borne by me.

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

منابع مشابه

Efficient and Sustainable Management of Product Durability and Recyclability

In a dynamic general equilibrium model we explictly consider the relationship between the product attributes ’durability’ and ’recyclability’. Both efficiency and sustainability aspects are taken into account. It turns out (a) that durability may be inefficient even in a perfectly competitive economy in which environmental externalities are absent, (b) that in case where markets for product des...

متن کامل

Tax Liability Side Equivalence in Gift-Exchange Labor Markets

Tax Liability Side Equivalence (tax LSE) claims that the statutory incidence of a tax is irrelevant for its economic incidence. Tax LSE is predicted to hold in gift-exchange labor markets if workers’ effort choices exclusively depend on the net wage, but breaks down if they partially depend on the gross wage paid to workers. This is the case if the tax is perceived to be external to the gift-ex...

متن کامل

Constrained Efficient Taxation of Capital

I show in this paper that in an overlapping generations economy with production à la Diamond (1965) in which the agents can only save in terms of physical capital, the laissez-faire competitive equilibrium steady state is not only typically inefficient among all feasible steady states the economy may start from, but it is even ”constrained inefficient”, that is to say, dominated by other steady...

متن کامل

Tax incidence and price discrimination: An application of theories to gambling markets

Article history: Received 17 September 2011 Received in revised form 30 October 2013 Accepted 31 October 2013 Available online 7 November 2013 This paper examines whether a casino tax is good for local welfare in a tourism economy. We find that what is important for efficiency is not the tax rate itself but the tax incidence on tourists. Casino tourism in Macao engages in price discrimination v...

متن کامل

Taxes, Subsidies and Equilibrium Labor Market Outcomes

We explore the effects of taxes and subsidies on job creation, job destruction, employment, and wages in the Mortensen-Pissarides version of the search and matching equilibrium framework. Qualitative analytical results show that wage and employment subsidies increase employment, especially of low skill workers, and also increase wages. A job creation or hiring subsidy reduces unemployment durat...

متن کامل

ذخیره در منابع من


  با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

عنوان ژورنال:

دوره   شماره 

صفحات  -

تاریخ انتشار 2004