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dc.titleTaxation when Markets are not Competitive: Evidence from a Loan Tax
dc.contributor.authorBrugués, Felipe
dc.contributor.authorDe Simone, Rebeca
dc.contributor.orgunitDepartment of Research and Chief Economist
dc.coverageEcuador
dc.date.available2024-02-14T00:02:00
dc.date.issue2024-02-14T00:02:00
dc.description.abstractWe 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.
dc.format.extent92
dc.identifier.doihttp://dx.doi.org/10.18235/0005548
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Taxation-when-Markets-are-not-Competitive-Evidence-from-a-Loan-Tax.pdf
dc.language.isoen
dc.publisherInter-American Development Bank
dc.subjectTaxation
dc.subjectBank Loan
dc.subjectCompetitiveness
dc.subjectSmall Business
dc.subjectInterest Rate
dc.subjectEconomy
dc.subjectRating
dc.subject.jelcodeG21 - Banks • Depository Institutions • Micro Finance Institutions • Mortgages
dc.subject.jelcodeG28 - Government Policy and Regulation
dc.subject.keywordsBanks;Government regulation of banks;Taxation and subsidies;market structure;firm strategy;market performance
dc.typeWorking Papers
idb.identifier.pubnumberIDB-WP-01580
idb.operationRG-K1198
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