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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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File URL: http://hdl.handle.net/10.1007/s10797-005-0497-5
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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
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102915

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  1. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  2. Ben Lockwood & David Meza & Gareth Myles, 1994. "When are origin and destination regimes equivalent?," International Tax and Public Finance, Springer, vol. 1(1), pages 5-24, February.
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  8. Haufler, Andreas & Pflüger, Michael, 2004. "International commodity taxation under monopolistic competition," Munich Reprints in Economics 20425, University of Munich, Department of Economics.
  9. Haufler, Andreas & Schjelderup, Guttorm, 2004. "Tacit collusion and international commodity taxation," Munich Reprints in Economics 20417, University of Munich, Department of Economics.
  10. Lockwood, Ben, 2001. "Tax competition and tax co-ordination under destination and origin principles: a synthesis," Journal of Public Economics, Elsevier, vol. 81(2), pages 279-319, August.
  11. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
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  13. Lockwood, Ben, 1993. "Commodity tax competition under destination and origin principles," Journal of Public Economics, Elsevier, vol. 52(2), pages 141-162, September.
  14. 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.
  15. Kolstad, Charles D & Mathiesen, Lars, 1987. "Necessary and Sufficient Conditions for Uniqueness of a Cournot Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 54(4), pages 681-90, October.
  16. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
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