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Commodity Taxation and International Trade in Imperfect Markets

  • Andreas Haufler
  • Guttorm Schjelderup
  • Frank Stähler

This paper studies non-cooperative commodity taxation in a trade model with imperfect competition and trade costs. Nationally optimal tax policy simultaneously tries to correct the domestic distortion from imperfect competition and to shift rents to the home country. Importantly, this trade-off depends qualitatively on the international commodity tax regime in operation. For low levels of trade costs, we show that production-based commodity taxes dominate from a global welfare perspective, but this ranking is reversed in favor of consumption-based taxation when trade costs become sufficiently high.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 376.

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Date of creation: 2000
Date of revision:
Handle: RePEc:ces:ceswps:_376
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  1. 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.
  2. Sijbren Cnossen, 1998. "Global Trends and Issues in Value Added Taxation," International Tax and Public Finance, Springer, vol. 5(3), pages 399-428, July.
  3. Jack Mintz & Henry Tulkens, 1984. "Commodity Tax Competition Between Member States of a Federation," Working Papers 558, Queen's University, Department of Economics.
  4. Hagen, K.P. & Osmundsen, P. & Schjelderup, G., 1995. "Internationally Mobile Firms and Tax Policy," Papers 8/95, Norwegian School of Economics and Business Administration-.
  5. 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.
  6. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
  7. Michael Keen & Sajal Lahiri, 1994. "The comparison between destination and origin principles under imperfect competition," IFS Working Papers W94/08, Institute for Fiscal Studies.
  8. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
  9. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
  10. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  11. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695.
  12. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  13. Lockwood, Ben, 1992. "Commodity Tax Competition Under Destination and Origin Principles," CEPR Discussion Papers 733, C.E.P.R. Discussion Papers.
  14. Markusen, James R. & Morey, Edward R. & Olewiler, Nancy, 1995. "Competition in regional environmental policies when plant locations are endogenous," Journal of Public Economics, Elsevier, vol. 56(1), pages 55-77, January.
  15. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  16. Mintz, J. & Tulkens, H., 1984. "Commodity tax competition between member states of a federation: equilibrium and efficiency," CORE Discussion Papers 1984027, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. Michael Rauscher, 1995. "Environmental regulation and the location of polluting industries," International Tax and Public Finance, Springer, vol. 2(2), pages 229-244, August.
  18. James A. Brander & Paul Krugman, 1983. "A 'Reciprocal Dumping' Model of International Trade," NBER Working Papers 1194, National Bureau of Economic Research, Inc.
  19. Osmundsen, P. & Hagen, K. P. & Schjelderup, G., 1998. "Internationally mobile firms and tax policy1," Journal of International Economics, Elsevier, vol. 45(1), pages 97-113, June.
  20. 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.
  21. Mikesell, John L., 1997. "The American Retail Sales Tax: Considerations on Their Structure, Operations, and Potential as a Foundation for a Federal Sales Tax," National Tax Journal, National Tax Association, vol. 50(1), pages 149-65, March.
  22. James R. Markusen & Anthony J. Venables, 1995. "Multinational Firms and The New Trade Theory," NBER Working Papers 5036, National Bureau of Economic Research, Inc.
  23. Hoel, Michael, 1997. " Environmental Policy with Endogenous Plant Locations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 241-59, June.
  24. repec:oup:qjecon:v:110:y:1995:i:4:p:857-80 is not listed on IDEAS
  25. Delipalla, Sofia & Keen, Michael, 1992. "The comparison between ad valorem and specific taxation under imperfect competition," Journal of Public Economics, Elsevier, vol. 49(3), pages 351-367, December.
  26. Andreas Haufler & Ian Wooton, . "Country Size and Tax Competition for Foreign Direct Investment," Working Papers 9702, Business School - Economics, University of Glasgow.
  27. Janeba, Eckhard, 1998. "Tax competition in imperfectly competitive markets," Journal of International Economics, Elsevier, vol. 44(1), pages 135-153, February.
  28. 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.
  29. Krugman, Paul R, 1987. "Is Free Trade Passe?," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 131-44, Fall.
  30. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  31. Rauscher, Michael, 1994. "Environmental Regulation and the Location of Polluting Industries," CEPR Discussion Papers 1032, C.E.P.R. Discussion Papers.
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