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Tax competition and the creation of redundant products

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  • Charles A.M. de Bartolome

Abstract

There are products that are assembled from kits but that, once assembled, are identical to other products. An example is the roll-your-own cigarette. Because the kit requires time to assemble, it is more costly than the assembled product; in the absence of tax competition, the kit is not bought or is `redundant.' I show that tax competition between regions supports strategies that tax the `redundant' product at a lower tax rate than its assembled counterpart, and it is bought. A welfare loss is thereby created.

Suggested Citation

  • Charles A.M. de Bartolome, 2007. "Tax competition and the creation of redundant products," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1213-1236, November.
  • Handle: RePEc:cje:issued:v:40:y:2007:i:4:p:1213-1236
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    Cited by:

    1. Ian Irvine & William Sims, 2012. "A Taxing Dilemma: Assessing the Impact of Tax and Price Changes on the Tobacco Market," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 350, May.
    2. Charles A.M. de Bartolome & Ian J. Irvine, 2010. "The Economics of Smoking Bans," Working Papers 201027, Geary Institute, University College Dublin.

    More about this item

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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