Susan Skeath

A Pareto comparison of ad valorem and unit taxes in noncompetitive environments

Abstract A literature that began with Wicksell (1896) has shown that an ad valorem tax is welfare superior to an equal-yield unit tax in both monopoly and oligopoly markets. This paper proves a stronger result: for any unit tax imposed on a monopoly, there exists an ad valorem tax that Pareto dominates it — that produces larger profit, tax revenue, and consumer surplus. The paper then considers whether this Pareto result generalizes to all Cournot–Nash oligopolies. The paper shows that Pareto dominance holds in such markets whenever the tax level exceeds a critical value that depends on various market parameters.

Evidence on the upstream and downstream impacts of antidumping cases

Abstract Anecdotal and theoretical evidence suggests that antidumping cases filed on behalf of domestic upstream intermediate products affect not only the upstream competitors, but also the downstream users. We empirically examine these claims using a panel of upstream/downstream product pairs over the 1977–1992 period. The results show that the imposition of antidumping duties in an upstream industry positively affects the quantity and value of domestic upstream production and negatively affects the quantity of downstream production. In addition, we find evidence that duties negatively affect the quantity value of dumped upstream imports (the harassment effect), positively affect non-dumped upstream imports in quantity terms (the diversion effect), and positively affect the value share of upstream domestic production (market-share shifting).

Pareto ranking optimal tariffs under foreign monopoly

Abstract This paper shows that whether or not optimal ad valorem and specific tariffs can be Pareto ranked for a country trading with a foreign monopoly firm depends on parameters of the economy.

Pareto-superior trade policy

Current literature shows the welfare superiority of ad valorem over specific tariffs or domestic governments facing foreign monopolists. This note establishes the stronger result that, for any given specific tariff imposed on a foreign monopoly, there exists an ad valorem tariff that Pareto dominates it - that produces larger profit for the foreign firm as well as larger tariff revenue and consumer surplus for the domestic economy. This Pareto ranking can be extended to the case of foreign Cournot oligopoly under certain market conditions.

Role for trade policy? markets with informational barriers to entry

When barriers to entry are created by an informational asymmetry between firms and consumers about the quality of a product, there may be a role for trade policy, in general, and for infant industry protection, in particular. This paper extends the recent literature investigating the role of trade policy in improving national welfare in models with informational barriers to entry. Results from a new variant of the existing models show that export subsidies are not the optimal policy response to market failures associated with experience goods. Further analysis shows that the role for trade policy in the literature as a whole depends on the types of market failures that arise in each model.

Strategic product choice and equilibrium traps for less developed countries

Strategic trade considerations will influence product choice decisions of less developed countries (LDCs) when products with learning-augmented technologies are involved. With constant rates of time preference and learning economies in production, welfare-maximizing production strategies in the international trade product choice game depend on relative levels of ‘impatience’ across countries, demand and learning parameters, and the other LDCs production strategy. Further, a low level growth ‘trap’ equilibrium for one LDC arises naturally from the choice theoretic context of the model and international coordination may be needed to obtain Pareto-efficient outcomes in some cases. Multiple LDC production of the good with learning benefits in production is generally discouraged by price and strategic interaction effects.

Consistent Comparisons Between Monopoly and Perfect Competition

Some inconsistencies in standard treatments of the perfect competition–monopoly welfare comparison are identified. A more consistent and productive pedagogical approach for courses in intermediate microeconomics is suggested.