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International commodity taxation in the presence of unemployment

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Author Info
Moriconi, Simone
Sato, Yasuhiro

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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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Publisher 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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Related research
Keywords: Commodity taxation Destination principle Origin principle Unemployment Employment externality;

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  2. Keen, Michael & Lahiri, Sajal & Raimondos-Moller, Pascalis, 2002. "Tax principles and tax harmonization under imperfect competition: A cautionary example," European Economic Review, Elsevier, vol. 46(8), pages 1559-1568, September. [Downloadable!] (restricted)
    Other versions:
  3. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163 Elsevier. [Downloadable!] (restricted)
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  8. Fiorito, Riccardo & Padrini, Flavio, 2001. " Distortionary Taxation and Labour Market Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 173-96, May. [Downloadable!] (restricted)
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  15. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March. [Downloadable!] (restricted)
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  17. Ogawa, Hikaru & Sato, Yasuhiro & Tamai, Toshiki, 2006. "A note on unemployment and capital tax competition," Journal of Urban Economics, Elsevier, vol. 60(2), pages 350-356, September. [Downloadable!] (restricted)
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    Other versions:
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