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Destination- versus Origin-based Commodity Taxation and the Location of Industry


  • Behrens, Kristian
  • Hamilton, Jonathan
  • Ottaviano, Gianmarco
  • Thisse, Jacques-François


This Paper studies the positive aspects of destination vs. origin principles of commodity taxation as well as tax harmonization, with an emphasis on the international implications of these measures when firms are mobile. We investigate the tax incidence of these two principles on price levels and uncover how taxes and trade costs interact. While under the destination principle an increase in the tax rate of a country always causes some firms to relocate to the other, this effect may get reversed under the origin principle when economic integration is deep enough, so that a tax increase leads to an inflow of capital.

Suggested Citation

  • Behrens, Kristian & Hamilton, Jonathan & Ottaviano, Gianmarco & Thisse, Jacques-François, 2004. "Destination- versus Origin-based Commodity Taxation and the Location of Industry," CEPR Discussion Papers 4671, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4671

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    References listed on IDEAS

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    12. Harrigan, James, 1997. "Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model," American Economic Review, American Economic Association, vol. 87(4), pages 475-494, September.
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    Cited by:

    1. Moriconi, Simone & Sato, Yasuhiro, 2009. "International commodity taxation in the presence of unemployment," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 939-949, August.
    2. Andreas Haufler & Michael Pflüger, 2007. "International Oligopoly and the Taxation of Commerce with Revenue-Constrained Governments," Economica, London School of Economics and Political Science, vol. 74(295), pages 451-473, August.

    More about this item


    commodity tax; destination principle; home market effect; origin principle; tax harmonization;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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