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Cross-Border Shopping and the Optimum Commodity Tax in a Competitive and a Monopoly Market

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  • Christiansen, Vidar

Abstract

Using a partial equilibrium model, optimality rules for a commodity tax are derived for an economy that is exposed to cross-border shopping. In a competitive market, the conventional inverse elasticity rule is shown to be valid with the qualification that it is the elasticity of domestic rather than total demand that matters. With a foreign monopoly, the inverse elasticity is modified by a tax-shifting effect. When the supplier is a multinational firm, price repercussions abroad should be taken into account. The implications for domestic taxation of the prices and taxes set abroad are also examined. Copyright 1994 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Christiansen, Vidar, 1994. " Cross-Border Shopping and the Optimum Commodity Tax in a Competitive and a Monopoly Market," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(3), pages 329-341.
  • Handle: RePEc:bla:scandj:v:96:y:1994:i:3:p:329-41
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    Citations

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    Cited by:

    1. Andreas Haufler, 1996. "Optimal factor and commodity taxation in a small open economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(3), pages 425-442, July.
    2. Ohsawa, Yoshiaki, 2003. "A spatial tax harmonization model," European Economic Review, Elsevier, vol. 47(3), pages 443-459, June.
    3. Odd E. Nygård & John T. Revesz, 2015. "Optimal indirect taxation and the uniformity debate: A review of theoretical results and empirical contributions," Discussion Papers 809, Statistics Norway, Research Department.
    4. Montfort Mlachila & Edgardo Ruggiero & David Corvino, 2016. "Unintended Consequences; Spillovers from Nigeria’s Fuel Pricing Policies to Its Neighbor," IMF Working Papers 16/17, International Monetary Fund.
    5. Andrés Leal & Julio López-Laborda & Fernando Rodrigo, 2010. "Cross-Border Shopping: A Survey," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 16(2), pages 135-148, May.
    6. Kaisa Kotakorpi, 2009. "Paternalism and Tax Competition," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 125-149, March.
    7. Odd Erik Nygård, 2014. "Optimal Commodity Taxes for Norway with Cross-Border Shopping," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(2), pages 316-342, June.
    8. Desiderio Romero-Jordán & Marta Jorge García-Inés & Santiago Álvarez García, 2013. "The impact of fuel tourism on retailers’ diesel price in Spanish neighbouring regions," Applied Economics, Taylor & Francis Journals, vol. 45(4), pages 407-413, February.
    9. 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.
    10. Leal, Andrés & López-Laborda, Julio & Rodrigo, Fernando, 2009. "Prices, taxes and automotive fuel cross-border shopping," Energy Economics, Elsevier, vol. 31(2), pages 225-234.
    11. repec:kap:iaecre:v:16:y:2010:i:2:p:135-148 is not listed on IDEAS
    12. Andreas Haufler, 1996. "Tax coordination with different preferences for public goods: Conflict or harmony of interest?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(1), pages 5-28, January.

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