Publication:
Excise taxes, over-shifting, cross-elasticity, and tax revenue

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Authors
Dutkowsky, Donald H.
Sullivan, Ryan S.
Subjects
Tax incidence
excise tax
over-shifting
tax revenue
cross-elasticity
Advisors
Date of Issue
2017
Date
Publisher
Taylor and Francis Group
Language
Abstract
This article examines cross-elasticity effects in excise taxation for markets characterized by monopolistic competition and over-shifting. Extending the constant elasticity demand model to consider cross-elasticity leads to notably different results regarding tax revenue maximization. With nonzero but weak cross-elasticity effects relative to the price elasticity, we derive a higher optimal tax-price ratio compared to prior research. With strong crosselasticity, revenue can continually be increased by raising the excise tax. Overall, the study offers government greater incentive to use excise taxes to obtain revenue.
Type
Article
Description
The article of record as published may be found at http://dx.doi.org/10.1080/13504851.2016.1167821
Series/Report No
Department
Organization
Naval Postgraduate School (U.S.)
Identifiers
NPS Report Number
Sponsors
Funder
Format
5 p.
Citation
Dutkowsky, Donald H., and Ryan S. Sullivan. "Excise taxes, over-shifting, cross-elasticity, and tax revenue." Applied Economics Letters 24.2 (2017): 113-116.
Distribution Statement
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.
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