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Commodity Taxation and Parallel Imports

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Author Info

  • Raimondos-Møller, Pascalis

    (Department of Economics, Copenhagen Business School)

  • Schmitt, Nicolas

    (Department of Economics, Copenhagen Business School)

Abstract

We examine the interaction between commodity taxes and parallel imports in a simple two-country model with imperfect competition. While governments determine non-cooperatively their commodity tax rate, the volume of parallel imports is determined endogenously by the retailing sector. We compare the positive and normative implications of having commodity taxes based on destination or origin principle. Origin taxes are shown to have very attractive properties: they lead to lower levels of optimal taxes, they converge as parallel imports increase (while destination taxes diverge), and they lead to higher welfare levels

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Bibliographic Info

Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 04-2007.

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Length: 22 pages
Date of creation: 01 Jan 2007
Date of revision:
Handle: RePEc:hhs:cbsnow:2007_004

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Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Phone: 38 15 25 75
Fax: 38 15 34 99
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Web page: http://www.cbs.dk/departments/econ/
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References

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  1. Panos Kanavos & Joan Costa-Font, 2005. "Pharmaceutical parallel trade in Europe: stakeholder and competition effects," Economic Policy, CEPR & CES & MSH, vol. 20(44), pages 751-798, October.
  2. Keen, Michael & Lahiri, Sajal, 1993. "Domestic tax reform and international oligopoly," Journal of Public Economics, Elsevier, vol. 51(1), pages 55-74, May.
  3. Michael Keen and Sajal Lahiri, . "The Comparison Between Destination and Origin Principles Under Imperfect Competition," Economics Discussion Papers 424, University of Essex, Department of Economics.
  4. Grossman, Gene & Lai, Edwin, 2006. "Parallel Imports and Price Controls," CEPR Discussion Papers 5779, C.E.P.R. Discussion Papers.
  5. Reza Ahmadi & B. Rachel Yang, 2000. "Parallel Imports: Challenges from Unauthorized Distribution Channels," Marketing Science, INFORMS, vol. 19(3), pages 279-294, March.
  6. Andreas Haufler & Michael Pflüger, 2007. "International Oligopoly and the Taxation of Commerce with Revenue-Constrained Governments," Economica, London School of Economics and Political Science, vol. 74(295), pages 451-473, 08.
  7. Michael Keen & Sajal Lahiri & Pascalis Raimondos-Møller, 2001. "Tax Principles and Tax Harmonization under Imperfect Competition: A Cautionary Example," CESifo Working Paper Series 518, CESifo Group Munich.
  8. Ganslandt, Mattias & Maskus, Keith E., 2007. "Vertical distribution, parallel trade, and price divergence in integrated markets," European Economic Review, Elsevier, vol. 51(4), pages 943-970, May.
  9. Malueg, D.A. & Schwartz, M., 1993. "Parallel Imports, Demand Dispersion and International Price Discrimination," Papers 93-6, U.S. Department of Justice - Antitrust Division.
  10. Raff, Horst & Schmitt, Nicolas, 2005. "Why Parallel Trade May Raise Producers' Profits," Economics Working Papers 2005,07, Christian-Albrechts-University of Kiel, Department of Economics.
  11. Li, Changying & Maskus, Keith E., 2006. "The impact of parallel imports on investments in cost-reducing research and development," Journal of International Economics, Elsevier, vol. 68(2), pages 443-455, March.
  12. Maskus, Keith E. & Yongmin Chen, 2000. "Vertical price control and parallel imports - theory and evidence," Policy Research Working Paper Series 2461, The World Bank.
  13. Andreas HaufLer & Guttorm Schjelderup & Frank Stähler, 2005. "Barriers to Trade and Imperfect Competition: The Choice of Commodity Tax Base," International Tax and Public Finance, Springer, vol. 12(3), pages 281-300, May.
  14. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, 09.
  15. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
  16. Yongmin Chen & Keith Maskus, 2005. "Vertical Pricing and Parallel Imports," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(1), pages 1-18.
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Cited by:
  1. Rajat Acharyya & Maria D.C. Garcia-Alonso, 2010. "Income Based Price Subsidies and Parallel Imports," Studies in Economics 1008, Department of Economics, University of Kent.
  2. Birg, Laura, 2013. "Externalities of national pharmaceutical policy when markets are integrated through parallel trade," Center for European, Governance and Economic Development Research Discussion Papers 178, University of Goettingen, Department of Economics.

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