@misc{34800,
title = {Taxation when Markets are not Competitive: Evidence from a Loan Tax},
author = {Brugués, Felipe and De Simone, Rebeca},
year = {2024},
doi = {10.18235/0005548},
abstract = {We study the interaction of market structure and tax-and-subsidy strategies utilizing pass-through estimates from the unexpected introduction of a loan tax in Ecuador, a quantitative model, and a comprehensive commercial-loan dataset. Our model generalizes bank competition theories, including Bertrand-Nash competition, credit rationing, and joint-maximization. While we find the loan tax is distortionary, neglecting the possibility of non-competitive lending inflates estimated tax deadweight loss by 80% because non-competitive banks internalize some of the burden. Conversely, subsidies are less effective in non-competitive settings. If competition were stronger, tax revenue would be 10% lower. The findings suggest that policymakers should consider market structure in tax-and-subsidy strategies.},
url = {https://doi.org/10.18235/0005548}
}