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Commodity Taxation and international Trade in Imperfect Markets

  • Andreas Haufler

    (University of Goettingen and CESifo)

  • Guttorm Schjelderup

    (Norwegian School of Economics and Business Administration and CSEifo)

  • Frank Staehler

    (University of Kiel)

This paper studies non-cooperative commodity taxation in a trade model with im-perfect 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 inter-national 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 Center of Finance and Econometrics, University of Konstanz in its series CoFE Discussion Paper with number 00-32.

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Length: 31 Pages
Date of creation: Oct 2000
Date of revision:
Handle: RePEc:knz:cofedp:0032
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  1. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
  2. 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.
  3. Janeba, Eckhard, 1998. "Tax competition in imperfectly competitive markets," Journal of International Economics, Elsevier, vol. 44(1), pages 135-153, February.
  4. James Brander & Paul Krugman, 1982. "A 'Reciprocal Dumping' Model of International Trade," Working Papers 513, Queen's University, Department of Economics.
  5. Krugman, Paul R, 1987. "Is Free Trade Passe?," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 131-44, Fall.
  6. 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.
  7. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
  8. 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.
  9. 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).
  10. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
  11. Michael Rauscher, 1995. "Environmental regulation and the location of polluting industries," International Tax and Public Finance, Springer, vol. 2(2), pages 229-244, August.
  12. Lockwood, Ben, 1993. "Commodity tax competition under destination and origin principles," Journal of Public Economics, Elsevier, vol. 52(2), pages 141-162, September.
  13. 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.
  14. Rauscher, Michael, 1994. "Environmental Regulation and the Location of Polluting Industries," CEPR Discussion Papers 1032, C.E.P.R. Discussion Papers.
  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. 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.
  17. Sofia Delipalla & Michael Keen, 1991. "The Comparison Between Ad Valorem and Specific Taxation under Imperfect Competition," Working Papers 821, Queen's University, Department of Economics.
  18. Sijbren Cnossen, 1998. "Global Trends and Issues in Value Added Taxation," International Tax and Public Finance, Springer, vol. 5(3), pages 399-428, July.
  19. Hagen, K.P. & Osmundsen, P. & Schjelderup, G., 1995. "Internationally Mobile Firms and Tax Policy," Papers 8/95, Norwegian School of Economics and Business Administration-.
  20. Andreas Haufler & Ian Wooton, . "Country Size and Tax Competition for Foreign Direct Investment," Working Papers 9702, Business School - Economics, University of Glasgow.
  21. 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 877-92, September.
  22. Michael Keen and Sajal Lahiri, . "The Comparison Between Destination and Origin Principles Under Imperfect Competition," Economics Discussion Papers 424, University of Essex, Department of Economics.
  23. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
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  25. 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.
  26. 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.
  27. Jack Mintz & Henry Tulkens, 1984. "Commodity Tax Competition Between Member States of a Federation," Working Papers 558, Queen's University, Department of Economics.
  28. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
  29. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  30. Hoel, Michael, 1997. " Environmental Policy with Endogenous Plant Locations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 241-59, June.
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