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Efficiency comparison of ad valorem and unit taxes has been traditionally based on consumer welfare. However, if the tax instrument also affects the distribution of firms over their productivities, the policy maker may be concerned about the implications on aggregate productivity as well. This paper makes an efficiency comparison of ad valorem and unit taxes by allowing the distribution of firms to...
The relative efficiency of ad-valorem and specific tariffs is still an active debate in the international trade literature. Contrary to the general belief about the ad-valorem tariff being superior under various imperfectly competitive market settings, it is shown that the specific tariff generates more welfare under monopolistic competition. We argue that this result is not general. If we follow...
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