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Cross-border shopping in a federal economy

Author

Listed:
  • LUCAS, Vander

Abstract

The purpose of this paper is to consider an economy that incorporates cross-border shopping and where the different levels of government are concerned with the well-being of their citizens. We assume a federal economy with a central government and two regions with specific characteristics. Two kinds of externalities, horizontal and vertical, arise and we show the possibilities of internalising them. With the governments of symmetric regions behaving as Nash players, they would optimally set their tax rates and replicate the unitary nation optimum. Finally, we show how the central government as a Stackelberg leader can adjust its fiscal instruments so that the tax externalities are also internalised.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • LUCAS, Vander, 2004. "Cross-border shopping in a federal economy," LIDAM Reprints CORE 1791, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1791
    DOI: 10.1016/S0166-0462(03)00045-0
    Note: In : Regional Science & Urban Economics, 34, 365-385, 2004
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    Cited by:

    1. Willem Sas, 2017. "Can fiscal equalisation mitigate tax competition? Ad valorem and residence-based taxation in a federation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(5), pages 817-853, September.
    2. Willem Sas, 2015. "Commuting in a federation: Horizontal and vertical tax externalities revisited," ERSA conference papers ersa15p690, European Regional Science Association.
    3. Dascher, Kristof & Haupt, Alexander, 2011. "The political economy of regional integration projects at borders where poor and rich meet: The role of cross-border shopping and community sorting," Journal of Urban Economics, Elsevier, vol. 69(1), pages 148-164, January.
    4. Aiura, Hiroshi & Ogawa, Hikaru, 2013. "Unit tax versus ad valorem tax: A tax competition model with cross-border shopping," Journal of Public Economics, Elsevier, vol. 105(C), pages 30-38.
    5. Desiderio Romero-Jordán & Marta Jorge Garc𫑉n鳠 & Santiago Álvarez Garc𨀍, 2013. "The impact of fuel tourism on retailers’ diesel price in Spanish neighbouring regions," Applied Economics, Taylor & Francis Journals, vol. 45(4), pages 407-413, February.
    6. Leal, Andrés & López-Laborda, Julio & Rodrigo, Fernando, 2009. "Prices, taxes and automotive fuel cross-border shopping," Energy Economics, Elsevier, vol. 31(2), pages 225-234.
    7. Diego Martínez-López, 2018. "Vertical Externalities Revisited: New Results with Public Inputs and Unit Taxation," Hacienda Pública Española / Review of Public Economics, IEF, vol. 225(2), pages 11-30, June.
    8. Kristof Dascher & Alexander Haupt, 2008. "The Political Economy of Regional Integration Projects at Borders where Rich and Poor Meet: The Role of Cross-Border Shopping and Community Sorting," CESifo Working Paper Series 2280, CESifo.
    9. repec:wvu:wpaper:05-12 is not listed on IDEAS
    10. Ramsey Doug & Thimm Tatanja & Hehn Leonie, 2019. "Cross-border Shopping Tourism: A Switzerland-Germany Case Study," European Journal of Tourism, Hospitality and Recreation, Sciendo, vol. 9(1), pages 3-17, May.
    11. Braid, Ralph M., 2013. "State and local tax competition in a spatial model with sales taxes and residential property taxes," Journal of Urban Economics, Elsevier, vol. 75(C), pages 57-67.
    12. Yoskowitz, David W. & Pisani, Michael J., 2007. "Risk and reward: Currency substitution and acceptance of the Mexican peso by firms in the United States southern frontier," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(3), pages 422-434, July.
    13. Wang, Lingxiao & Zheng, Yuqing, 2024. "Why are grocery foods taxed in the United States? Theory and spatial evidence from multilevel government interactions," Regional Science and Urban Economics, Elsevier, vol. 104(C).
    14. Kazuko Miyamoto, 2009. "A New Approach to Estimating Tax Interactions in Fiscal Federalism," Global COE Hi-Stat Discussion Paper Series gd08-053, Institute of Economic Research, Hitotsubashi University.
    15. Devereux, M.P. & Lockwood, B. & Redoano, M., 2007. "Horizontal and vertical indirect tax competition: Theory and some evidence from the USA," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 451-479, April.

    More about this item

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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