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The Economics of Duty-Free Shopping

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  • Vidar Christiansen
  • Stephen Smith

Abstract

In 1999 the EU abolished duty-free on intra-EU travel, whilst other countries still retain duty-free shopping for international travellers. We address several aspects of duty-free trade, including effects on consumption, revenue and price-setting. From a global perspective we identify the distortions generated by duty-free trade. We review, and dismiss, various arguments that might conceivably support a role for duty-free in promoting global economic welfare. The existence of duty-free trade is explained as a phenomenon that individual countries find in their national self interest as seen both from the arrival and the departure end, i.e. countries have reasons both to admit duty-free goods and to permit their sale to departing passengers.

Suggested Citation

  • Vidar Christiansen & Stephen Smith, 2001. "The Economics of Duty-Free Shopping," CESifo Working Paper Series 595, CESifo.
    • Handle: RePEc:ces:ceswps:_595
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    References listed on IDEAS

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    4. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, vol. 83(4), pages 877-892, September.
    5. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
    7. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Economics of Duty Free Shops
      by Paul in truck and barter on 2006-09-11 01:16:58

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    Cited by:

    1. Sijbren Cnossen, 2006. "Alcohol Taxation and Regulation in the European Union," CESifo Working Paper Series 1821, CESifo.
    2. Sijbren Cnossen, 2007. "Alcohol taxation and regulation in the European Union," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(6), pages 699-732, December.
    3. Andrea Gebauer & Chang Woon Nam & Rüdiger Parsche, 2002. "Lessons of the 1999 Abolition of Intra-EU Duty Free Sales for Eastern European EU Candidates," CESifo Working Paper Series 828, CESifo.

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    JEL classification:

    • H00 - Public Economics - - General - - - General

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