Stretching the Inelastic Rubber: Taxation, Welfare and Lobbies in Amazonia, 1870-1910

43 Pages Posted: 28 Oct 2009

See all articles by Felipe Tamega Fernandes

Felipe Tamega Fernandes

Harvard Business School, Entrepreneurial Management Unit

Date Written: October 27, 2009

Abstract

This paper examines the effect of government intervention via taxation on domestic welfare. A case-study of Brazilian market power on rubber markets during the boom years of 1870-1910 shows that the government generated 1.3% of GDP through an export tax on rubber but that it could have generated 4.7% in total, had the government set the tariff at the optimal level. National, regional and local constraints prevented the government from maximizing regional welfare. In a context of lobbies, government budget maximization may have differed from regional welfare maximization.

Keywords: Rubber, Commodities, Market Power, Optimal Tariff, Welfare, Trade and Brazil

JEL Classification: F14, H21, L13, L73, N76

Suggested Citation

Fernandes, Felipe Tamega, Stretching the Inelastic Rubber: Taxation, Welfare and Lobbies in Amazonia, 1870-1910 (October 27, 2009). Harvard Business School Entrepreneurial Management Working Paper No. 10-032, Available at SSRN: https://ssrn.com/abstract=1495185 or http://dx.doi.org/10.2139/ssrn.1495185

Felipe Tamega Fernandes (Contact Author)

Harvard Business School, Entrepreneurial Management Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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