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Tax Wedges and Mobile Capital


  • Jones, Ronald W


An import tariff or an export tax drives a wedge between the domestic price of a traded good faced in one country and that in another. But what can be said about the price of the taxed good relative to the price of untaxed goods in two countries? The standard Lloyd Metzler and Abba Lerner potentiall y paradoxical answers to this question are reconsidered in a trading world where one kind of sector-specific capital is internationally mo bile. It is argued that there is a presumption that taxing trade in c ommodities tends to weaken the price (both domestically and in world markets) of the good which utilizes mobile capital. Copyright 1987 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Jones, Ronald W, 1987. " Tax Wedges and Mobile Capital," Scandinavian Journal of Economics, Wiley Blackwell, vol. 89(3), pages 335-346.
  • Handle: RePEc:bla:scandj:v:89:y:1987:i:3:p:335-46

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    References listed on IDEAS

    1. Richard J. Rosen, 1991. "Research and Development with Asymmetric Firm Sizes," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 411-429, Autumn.
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    4. Leahy, Dermot & Neary, J Peter, 1996. "International R&D Rivalry and Industrial Strategy without Government Commitment," Review of International Economics, Wiley Blackwell, vol. 4(3), pages 322-338, October.
    5. Bagwell, Kyle & Staiger, Robert W., 1994. "The sensitivity of strategic and corrective R&D policy in oligopolistic industries," Journal of International Economics, Elsevier, vol. 36(1-2), pages 133-150, February.
    6. C Montagna, "undated". "Strategic Trade Policy When Firms Have Different Efficiency Levels," Dundee Discussion Papers in Economics 070, Economic Studies, University of Dundee.
    7. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
    8. Van Long, N. & Soubeyran, A., 1997. "Cost Manipulation in an Asymmetric Oligopoly: The Taxation Problem," ASSET - Instituto De Economia Publica 173, ASSET (Association of Southern European Economic Theorists).
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    10. W. Salant, Stephen & Shaffer, Greg, 1998. "Optimal asymmetric strategies in research joint ventures," International Journal of Industrial Organization, Elsevier, vol. 16(2), pages 195-208, March.
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    12. Barbara J. Spencer & James A. Brander, 1983. "International R & D Rivalry and Industrial Strategy," Review of Economic Studies, Oxford University Press, vol. 50(4), pages 707-722.
    13. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
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    Cited by:

    1. Chi-Chur Chao & Eden S. H. Yu, 2014. "Export-Share Requirements, Trade Balances, and Welfare: A Two-Period Analysis," World Scientific Book Chapters,in: TRADE-RELATED INVESTMENT MEASURES Theory and Applications, chapter 5, pages 77-89 World Scientific Publishing Co. Pte. Ltd..
    2. Beladi, Hamid & Chau, Nancy H. & Ali Khan, M., 2000. "North-South Investment Flows and Optimal Environmental Policies," Journal of Environmental Economics and Management, Elsevier, vol. 40(3), pages 275-296, November.
    3. Anil Lal, 2001. "Goods and factors liberalization under increasing returns to scale," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(2), pages 115-131.

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