The Laffer Curve, Efficiency, and Tax Policy: A Note
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Gerasimos T. Soldatos
Abstract
This short article underlines the efficiency considerations reflected by a Laffer curve. In a static context in which inflation is assumed away, the Laffer curve describes what would the response of tax revenue to tax rate change be under increasing inflation if there were allocative efficiency, i. e. given perfect competition and full-employment output. The link between market structure and state of economic activity thus emerges as a critical determinant of the shape of Laffer curve. Under imperfect competition, the entire Laffer curve would reflect how the business “leadership” having emanated from the prevailing market structure, uses taxation as a means of higher profit earning capacity.
Acknowledgment
This article has benefited from the comments and suggestions of two anonymous referees. Any remaining errors or omissions are my own.
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© 2016 Oldenbourg Wissenschaftsverlag GmbH, Published by De Gruyter Oldenbourg, Berlin/Boston
Articles in the same Issue
- Frontmatter
- Is Globalization Reducing the Ability of Central Banks to Control Inflation? A Literature Review with an Application to the Euro Area
- The Laffer Curve, Efficiency, and Tax Policy: A Note
- Public Goods, Private Consumption, and Human Capital: Using Boosted Regression Trees to Model Volunteer Labour Supply
- Pure Theory of the Federal Funds Rate
Articles in the same Issue
- Frontmatter
- Is Globalization Reducing the Ability of Central Banks to Control Inflation? A Literature Review with an Application to the Euro Area
- The Laffer Curve, Efficiency, and Tax Policy: A Note
- Public Goods, Private Consumption, and Human Capital: Using Boosted Regression Trees to Model Volunteer Labour Supply
- Pure Theory of the Federal Funds Rate
