A Note on Tanneries in Kanpur, Water Pollution in the Ganges, Taxation, and Tax Shifting

Batabyal, Amitrajeet (2025): A Note on Tanneries in Kanpur, Water Pollution in the Ganges, Taxation, and Tax Shifting.

Abstract

In this note, we provide the first game-theoretic analysis of taxation and tax shifting when tanneries in Kanpur, India, that produce leather and pollute the Ganges River are taxed. We model the n≥2 tanneries as a Cournot oligopoly and a specific tax τ>0 is imposed on each unit of leather produced by the polluting tanneries. We first determine the symmetric Nash equilibrium output of leather and its price with the tax. Second, we show that the rate of tax shifting by the polluting tanneries is constant. Third, we discuss how increasing either the number of tanneries or the price elasticity of demand affects the tax shifting that takes place. Finally, we comment on the policy implications of constant tax shifting such as the predictability of the incidence of the tax burden.

• Item Type: MPRA Paper
• Language: English
• Keywords: Ganges River, Tannery, Specific Tax, Tax Shifting, Water Pollution
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H22 - Incidence; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q25 - Water

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