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Commodity taxation and parallel imports

  • Raimondos-Møller, Pascalis
  • Schmitt, Nicolas

We examine the interaction between commodity taxes and parallel imports in a 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. We show that, as the volume of parallel imports increases, non-cooperative origin taxes converge, while destination taxes diverge. Moreover, origin taxes are more similar and lead to higher aggregate welfare levels than destination taxes.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 94 (2010)
Issue (Month): 1-2 (February)
Pages: 153-162

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Handle: RePEc:eee:pubeco:v:94:y:2010:i:1-2:p:153-162
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. 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.
  2. Gene M. Grossman & Edwin L.-C. Lai, 2008. "Parallel imports and price controls," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 378-402.
  3. Reza Ahmadi & B. Rachel Yang, 2000. "Parallel Imports: Challenges from Unauthorized Distribution Channels," Marketing Science, INFORMS, vol. 19(3), pages 279-294, March.
  4. Keen, Michael & Lahiri, Sajal, 1998. "The comparison between destination and origin principles under imperfect competition," Journal of International Economics, Elsevier, vol. 45(2), pages 323-350, August.
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  6. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
  7. Raff, Horst & Schmitt, Nicolas, 2007. "Why parallel trade may raise producers' profits," Journal of International Economics, Elsevier, vol. 71(2), pages 434-447, April.
  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. Haufler, Andreas & Pflüger, Michael, 2007. "International oligopoly and the taxation of commerce with revenue-constrained governments," Munich Reprints in Economics 20424, University of Munich, Department of Economics.
  10. Keith E. Maskus & Yongmin Chen, 2004. "Vertical Price Control and Parallel Imports: Theory and Evidence," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 551-570, 09.
  11. Lockwood, B., 2000. "Tax Competition and Tax Co-Ordination Under Destination and Origin Principles: A Synthesis," The Warwick Economics Research Paper Series (TWERPS) 567, University of Warwick, Department of Economics.
  12. 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.
  13. Gene M. Grossman & Edwin C.-L. Lai, 2006. "Parallel Imports and Price Controls," NBER Working Papers 12423, National Bureau of Economic Research, Inc.
  14. Malueg, D.A. & Schwartz, M., 1993. "Parallel Imports, Demand Dispersion and International Price Discrimination," Papers 93-6, U.S. Department of Justice - Antitrust Division.
  15. 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.
  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.
  17. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, 09.
  18. 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.
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