Proportional profit taxes and resource management under production uncertainty

The impact of proportional profit taxes on input use is analyzed under cond itions of production uncertainty and risk aversion. Two kinds of profit tax es are considered: proportional profit taxes with perfect loss offset and r evenue-neutral profit taxes. Their impact on optimal, input use is examined under various forms of production uncertainty, such as the Just-Pope model and the cases of multiplicative and additive uncertainty. It is shown that the structure of risk attitudes, the form of production uncertainty, the u nderlying (stochastic) technical interdependencies, and the risk-input rela tions are crucial features in determining the impact of proportional profit taxes on optimal input use.