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Cross-Border Shopping in a Federalist Economy

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Author Info
Vander LUCAS (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES), Universidade Catolica de Brasilia,Brazil)

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Abstract

The purpose of this paper is to consider an economy in which incorporates cross-border shopping and where the different levels of government worry about the well-being of their citizens. We assume a federalist economy with a central government and two regions with specific characteristics. Two kinds of externalities, horizontal and vertical, arise and we show the possibilities to internalise them. With the governments of symmetric regions behaving as Nash players they would optimally set their tax rate and replicate the unitary nation optimum. Finally, we show how the central government as a Stackelerg leader can adjust its fiscal instruments so that the tax externalities are also internalised.

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Publisher Info
Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2002018.

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Length: 20
Date of creation: 01 May 2001
Date of revision: 28 May 2002
Handle: RePEc:ctl:louvir:2002018

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Related research
Keywords: Cross-Border Shopping; Commodity Tax Competition; Fiscal Federalism;

Find related papers by JEL classification:
H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
R2 - Urban, Rural, and Regional Economics - - Household Analysis

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Trandel, Gregory A., 1994. "Interstate commodity tax differentials and the distribution of residents," Journal of Public Economics, Elsevier, vol. 53(3), pages 435-457, March. [Downloadable!] (restricted)
  3. You-Qiang Wang, 1999. "Commodity Taxes under Fiscal Competition: Stackelberg Equilibrium and Optimality," American Economic Review, American Economic Association, vol. 89(4), pages 974-981, September. [Downloadable!] (restricted)
  4. Robin Boadway & Michael Keen, 1999. "Redistribution," Working Papers 983, Queen's University, Department of Economics. [Downloadable!]
    Other versions:
    • Boadway, Robin & Keen, Michael, 2000. "Redistribution," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 12, pages 677-789 Elsevier. [Downloadable!] (restricted)
  5. BOADWAY, Robin & MARCHAND, Maurice & VIGNEAULT, Marianne, 1998. "The consequences of overlapping tax bases for redistribution and public spending in a federation," CORE Discussion Papers 1998003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    Other versions:
  6. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, vol. 83(4), pages 877-92, September. [Downloadable!] (restricted)
    Other versions:
  7. Michael Keen, 1998. "Vertical Tax Externalities in the Theory of Fiscal Federalism," IMF Staff Papers, Palgrave Macmillan Journals, vol. 45(3), pages 3. [Downloadable!] (restricted)
    Other versions:
  8. 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. [Downloadable!] (restricted)
  9. Richard Bird & Pierre Gendron, 1998. "Dual VATs and Cross-Border Trade: Two Problems, One Solution?," International Tax and Public Finance, Springer, vol. 5(3), pages 429-442, July. [Downloadable!] (restricted)
  10. Nielsen, Soren Bo, 2001. " A Simple Model of Commodity Taxation and Cross-Border Shopping," Scandinavian Journal of Economics, Blackwell Publishing, vol. 103(4), pages 599-623, December. [Downloadable!] (restricted)
  11. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-33, November. [Downloadable!] (restricted)
  12. Mintz, Jack & Tulkens, Henry, 1986. "Commodity tax competition between member states of a federation: equilibrium and efficiency," Journal of Public Economics, Elsevier, vol. 29(2), pages 133-172, March. [Downloadable!] (restricted)
    Other versions:
  13. Haufler, Andreas, 1998. "Asymmetric commodity tax competition -- comment on de Crombrugghe and Tulkens," Journal of Public Economics, Elsevier, vol. 67(1), pages 135-144, January. [Downloadable!] (restricted)
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