Market Power and Income Taxation

This article analyzes concerns about market power and inequality in a model with multiple sectors, heterogeneous abilities, endogenous labor supply, nonlinear income taxation. Proportional markups no profit dissipation have effect on the economy, policy that reduces nonproportional markup raises (lowers) welfare when it is higher (lower) than weighted average of other markups. With proportional (partial or full) dissipation, are equivalent to downward shift distribution optimal rule maximizes consumer plus producer surplus despite for supply distortion. (JEL D43, D61, H21, H23, H24, K21, L13, L40)