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Barriers to Trade and Imperfect Competition: The Choice of Commodity Tax Base

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Author Info

  • Andreas HaufLer

    ()

  • Guttorm Schjelderup

    ()

  • Frank Stähler

    ()

Abstract

Recent work has started to analyze the choice of international commodity tax base under conditions of imperfect competition. This paper focuses on the effects of changing levels of trade barriers in a model where firms engage in duopoly competition and governments set commodity taxes non-cooperatively. It is shown that the consumption base (destination principle) dominates the production base (origin principle) when trade costs are high, but the ranking of the two tax bases is reversed for low levels of trade costs. We conclude that the case for origin-based commodity taxes becomes stronger when barriers to trade fall. Copyright Springer Science + Business Media, Inc. 2005

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File URL: http://hdl.handle.net/10.1007/s10797-005-0497-5
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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 12 (2005)
Issue (Month): 3 (May)
Pages: 281-300

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Handle: RePEc:kap:itaxpf:v:12:y:2005:i:3:p:281-300

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: commodity taxation; imperfect competition; strategic trade policy;

References

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  1. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
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  4. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
  5. Haufler, Andreas & Schjelderup, Guttorm, 2004. "Tacit collusion and international commodity taxation," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 577-600, March.
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  8. Lockwood, Ben, 2001. "Tax competition and tax co-ordination under destination and origin principles: a synthesis," Journal of Public Economics, Elsevier, vol. 81(2), pages 279-319, August.
  9. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 430-447, May.
  10. Ben Lockwood & David Meza & Gareth Myles, 1994. "When are origin and destination regimes equivalent?," International Tax and Public Finance, Springer, vol. 1(1), pages 5-24, February.
  11. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  12. Michael Keen & Sajal Lahiri, 1994. "The comparison between destination and origin principles under imperfect competition," IFS Working Papers W94/08, Institute for Fiscal Studies.
  13. Ravi Kanbur & Michael Keen, 1991. "Jeux Sans Frontieres: Tax Competition and Tax Coordination when Countries Differ in Size," Working Papers 819, Queen's University, Department of Economics.
  14. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  15. Lockwood, Ben, 1993. "Commodity tax competition under destination and origin principles," Journal of Public Economics, Elsevier, vol. 52(2), pages 141-162, September.
  16. James Brander, 1980. "Intra-Industry Trade in Identical Commodities," Working Papers 380, Queen's University, Department of Economics.
  17. Venables, Anthony J., 1985. "Trade and trade policy with imperfect competition: The case of identical products and free entry," Journal of International Economics, Elsevier, vol. 19(1-2), pages 1-19, August.
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