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International commodity taxation in the presence of unemployment

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  • Moriconi, Simone
  • Sato, Yasuhiro

Abstract

In this paper, we evaluate the impact of commodity tax competition on welfare and employment under the destination and origin principles, when the labor market is imperfectly competitive owing to a binding fixed wage. Our main finding is that commodity taxation causes an employment externality whose signs may be opposite under the two principles. While tax competition leads to inefficient tax rates under both principles, we also prove that the origin principle guarantees lower unemployment and higher welfare when the fixed wage is high. Finally, we show that the employment externality still exists in a standard union model of wage determination.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 7-8 (August)
Pages: 939-949

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Handle: RePEc:eee:pubeco:v:93:y:2009:i:7-8:p:939-949

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Web page: http://www.elsevier.com/locate/inca/505578

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Keywords: Commodity taxation Destination principle Origin principle Unemployment Employment externality;

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Citations

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Cited by:
  1. Sebastian Braun & Christian Spielmann, 2010. "Wage subsidies and international trade: When does policy coordination pay?," Kiel Working Papers 1599, Kiel Institute for the World Economy.
  2. Aiura, Hiroshi & Ogawa, Hikaru, 2013. "Unit tax versus ad valorem tax: A tax competition model with cross-border shopping," Journal of Public Economics, Elsevier, Elsevier, vol. 105(C), pages 30-38.
  3. MORICONI, Simone & SATO, Yasuhiro, 2006. "International commodity taxation in the presence of unemployment," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2006069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Hikaru Ogawa & Hiroshi Aiura, 2012. "Unit Tax versus Ad Valorem Tax: A Tax Competition Model with Cross-border Shopping," ERSA conference papers ersa12p428, European Regional Science Association.

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