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American Economic Review: Vol. 99 No. 1 (March 2009)

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Excise Taxes with Multiproduct Transactions

Article Citation

Hamilton, Stephen F. 2009. "Excise Taxes with Multiproduct Transactions." American Economic Review, 99(1): 458-71.

DOI: 10.1257/aer.99.1.458

Abstract

I examine excise taxes levied on multiproduct retailers. Excise taxes reduce equilibrium output and decrease equilibrium product variety in the short run, but taxes can raise output per product in the long run and induce entry. Excise taxes are overshifted into prices in a wide range of cases, including under linear and concave demand conditions, and excise taxes shift less than one-for-one into prices only when demand is highly convex. Multiproduct transactions substantively alter the efficiency of ad valorem and specific forms of excise taxes and affect the comparison of relative tax performance over short-run and long-run time horizons. (JEL H25, H32, L11, L13, L81)

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Appendix (154.68 KB)

Authors

Hamilton, Stephen F. (CA Polytechnic State U, San Luis Obispo)

JEL Classifications

H25: Business Taxes and Subsidies including sales and value-added (VAT)
H32: Fiscal Policies and Behavior of Economic Agents: Firm
L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L13: Oligopoly and Other Imperfect Markets
L81: Retail and Wholesale Trade; e-Commerce


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