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Barriers to Trade and Imperfect Competition: The Choice of Commodity Tax Base

  • Andreas HaufLer


  • Guttorm Schjelderup


  • Frank Stähler


Recent work has started to analyze the choice of international commodity tax base under conditions of imperfect competition. This paper focuses on the effects of changing levels of trade barriers in a model where firms engage in duopoly competition and governments set commodity taxes non-cooperatively. It is shown that the consumption base (destination principle) dominates the production base (origin principle) when trade costs are high, but the ranking of the two tax bases is reversed for low levels of trade costs. We conclude that the case for origin-based commodity taxes becomes stronger when barriers to trade fall. Copyright Springer Science + Business Media, Inc. 2005

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Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 12 (2005)
Issue (Month): 3 (May)
Pages: 281-300

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Handle: RePEc:kap:itaxpf:v:12:y:2005:i:3:p:281-300
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  1. Lockwood, Ben, 1993. "Commodity tax competition under destination and origin principles," Journal of Public Economics, Elsevier, vol. 52(2), pages 141-162, September.
  2. Andreas Haufler & Michael Pflüger, 2001. "International Commodity Taxation Under Monopolistic Competition," CESifo Working Paper Series 529, CESifo Group Munich.
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  10. Venables, Anthony J., 1985. "Trade and trade policy with imperfect competition: The case of identical products and free entry," Journal of International Economics, Elsevier, vol. 19(1-2), pages 1-19, August.
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  14. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
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  18. Ravi Kanbur & Michael Keen, 1991. "Jeux Sans Frontieres: Tax Competition and Tax Coordination when Countries Differ in Size," Working Papers 819, Queen's University, Department of Economics.
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