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A simple model of commodity taxation and cross-border shopping

Author

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  • Nielsen, Søren Bo

    (Department of Economics, Copenhagen Business School)

Abstract

This paper sets up a simple model in which two countries, differing in geographical extent, engage in commodity tax competition originating in opportunities for cross‐border shopping. The non‐cooperative tax equilibrium and various coordination initiatives are examined in the benchmark model and in two model extensions incorporating (i) costs of transportation for goods and (ii) border inspection. Among the more surprising results are the following: with (i), pure profits accrue to sellers near the border, but subjecting them to tax may lower the country's total tax revenue; with (ii), the volume of cross‐border shopping may well increase. JEL classification: H20; H87; H26
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Nielsen, Søren Bo, 1998. "A simple model of commodity taxation and cross-border shopping," Working Papers 13-1998, Copenhagen Business School, Department of Economics.
    • Handle: RePEc:hhs:cbsnow:1998_013
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    Keywords

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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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