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Cross-border shopping and the Atkinson–Stiglitz theorem

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  • Sebastian Kessing
  • Bernhard Koldert

Abstract

We introduce cross-border shopping and indirect tax competition into a model of optimal taxation. The Atkinson–Stiglitz result that indirect taxation cannot improve the efficiency of information-constrained tax-transfer policies, and that indirect taxes should not be differentiated across goods, is shown to hold in this case even if countries are asymmetric. However, if the tax system must contain indirect taxation, differentiated indirect tax rates arise in the equilibrium and restricting differentiated indirect taxation can be welfare-increasing. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Sebastian Kessing & Bernhard Koldert, 2013. "Cross-border shopping and the Atkinson–Stiglitz theorem," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(4), pages 618-630, August.
    • Handle: RePEc:kap:itaxpf:v:20:y:2013:i:4:p:618-630
    DOI: 10.1007/s10797-013-9287-7
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    Cited by:

    1. John T. Revesz, 2014. "A Numerical Model of Optimal Differentiated Indirect Taxation," Hacienda Pública Española / Review of Public Economics, IEF, vol. 211(4), pages 9-66, December.

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    More about this item

    Keywords

    Cross-border shopping; Atkinson–Stiglitz theorem; Tax competition; Direct and indirect taxes; H21; F15;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • F15 - International Economics - - Trade - - - Economic Integration

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