MARKET POWER AND THE LAFFER CURVE

• 成果类型: Article
• 署名作者: Miravete, Eugenio J.; Seim, Katja; Thurk, Jeff
• 署名单位: University of Texas System; University of Texas Austin; Center for Economic & Policy Research (CEPR); University of Pennsylvania; Center for Economic & Policy Research (CEPR); National Bureau of Economic Research; University of Notre Dame
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.3982/ECTA12307
• 发表日期: 2018
• 页码: 1651-1687
• 关键词: discrete-choice models; Tax rates; identification

摘要

We study commodity taxation and characterize the Laffer curve, a trade-off between tax rates and revenue, in noncompetitive markets. Pricing in these markets leads to incomplete tax pass-through and agents re optimize their purchase and pricing decisions in response to any tax change. We use detailed data from Pennsylvania, a state that monopolizes retail sales of alcoholic beverages, to estimate a model of demand for horizontally differentiated products that ties consumers' demographic characteristics to heterogeneous preferences for spirits. We find that under the state's current tax policy, spirits are overpriced. Distillers respond to decreases in the tax rate by increasing wholesale prices, which limits the state's revenue gain to only 13% of the incremental tax revenue predicted under the common assumption of perfect competition. The strategic response of noncompetitive firms to changes in taxation therefore flattens the Laffer curve significantly.