Research report 2011 - Max Planck Institute for Tax Law and Public Finance

Market Power and the Welfare Effects of Taxation

Morath, Florian
Finanzwissenschaft (Prof. Dr. Kai A. Konrad)
Max-Planck-Institut für Steuerrecht und Öffentliche Finanzen, München
The welfare effects of taxation and the impact of market power on tax incidence are decisive for the evaluation of tax reforms. Laboratory experiments confirm the theory-based prediction on welfare effects of taxation: firms with market power bear a large share of the burden of the increase of a unit sales tax, while firms with no market power are able to shift the burden of a tax increase on to the consumers.

For the full text, see the German version.

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