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Cross-Border Shopping and the Optimum Commodity Tax in a Competitive and a Monopoly Market

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  • Christiansen, Vidar
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    Abstract

    Using 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 Info

    Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

    Volume (Year): 96 (1994)
    Issue (Month): 3 ()
    Pages: 329-41

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    Handle: RePEc:bla:scandj:v:96:y:1994:i:3:p:329-41

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    Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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    Cited by:
    1. Ohsawa, Yoshiaki, 1999. "Cross-border shopping and commodity tax competition among governments," Regional Science and Urban Economics, Elsevier, vol. 29(1), pages 33-51, January.
    2. Leal, Andrés & López-Laborda, Julio & Rodrigo, Fernando, 2009. "Prices, taxes and automotive fuel cross-border shopping," Energy Economics, Elsevier, vol. 31(2), pages 225-234.
    3. Andreas Haufler, 1996. "Tax coordination with different preferences for public goods: Conflict or harmony of interest?," International Tax and Public Finance, Springer, vol. 3(1), pages 5-28, January.
    4. Haufler, Andreas, 1996. "Optimal Factor and Commodity Taxation in a Small Open Economy," Munich Reprints in Economics 20393, University of Munich, Department of Economics.
    5. 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.
    6. Ohsawa, Yoshiaki, 2003. "A spatial tax harmonization model," European Economic Review, Elsevier, vol. 47(3), pages 443-459, June.

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