Cross-Border Shopping and the Optimum Commodity Tax in a Competitive and a Monopoly Market
AbstractUsing a partial equilibrium model, optimality rules for a commodity tax are derived for an economy that is exposed to cross-border shopping. In a competitive market, the conventional inverse elasticity rule is shown to be valid with the qualification that it is the elasticity of domestic rather than total demand that matters. With a foreign monopoly, the inverse elasticity is modified by a tax-shifting effect. When the supplier is a multinational firm, price repercussions abroad should be taken into account. The implications for domestic taxation of the prices and taxes set abroad are also examined. Copyright 1994 by The editors of the Scandinavian Journal of Economics.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.
Volume (Year): 96 (1994)
Issue (Month): 3 ()
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
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- Andrés Leal & Julio López-Laborda & Fernando Rodrigo, 2010. "Cross-Border Shopping: A Survey," International Advances in Economic Research, Springer, vol. 16(2), pages 135-148, May.
- Ohsawa, Yoshiaki, 2003. "A spatial tax harmonization model," European Economic Review, Elsevier, vol. 47(3), pages 443-459, June.
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