Template-Type: ReDIF-Paper 1.0
Author-Name: Simone Moriconi
Author-X-Name-First: Simone Moriconi
Author-X-Name-Last: Moriconi
Author-Email: simone.moriconi@unicatt.it
Author-Workplace-Name: Università Cattolica del Sacro Cuore
Author-Workplace-Name: Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore



Title: Taxation, industry integration and production efficiency

Abstract: Taxes levied on production processes (e.g. VAT), are today a very important source
of government revenues in developed economies. Theories of optimal taxation conclude
that these taxes are detrimental to production efficiency, when firms operate
in perfectly competitive markets. These theories draw on the neoclassical approach,
which regards firms as single production units. The present paper investigates the
effects of taxation on production efficiency, accounting for the organization of an industry.
The model shows that a lump-sum tax does not have any effect on the organization
of the industry, while a non lump-sum tax can be designed that induces
an organizational change of the industry. The paper shows that the effect of this ”tax
induced organizational change” on production efficiency ultimately depends on the
characteristics of the market.
Length: 57
Creation-Date: 2016-06
File-URL: http://dipartimenti.unicatt.it/economia-finanza-def043.pdf
File-Format: Application/pdf
File-Function: First version, 2016
Number: def043
Classification-JEL: H21, L22, H32. 
Keywords: taxation, organizational change, vertical integration, and production efficiency.
Handle: RePEc:ctc:serie1:def043