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Commodity taxation and regulatory competition

  • Simone Moriconi


    (Catholic University of Milan, ITEMQ and CREA, University of Luxembourg)

  • Pierre M. Picard


    (CREA, University of Luxembourg)

  • Skerdilajda Zanaj


    (CREA, University of Luxembourg)

This paper studies competition in regulation and commodity taxation between trading countries. We present a general equilibrium model in which destination based consumption taxes finance public goods, while regulation of entry determines the number of firms in the markets. We find (i) no strategic interaction in commodity taxes; (ii) regulation leads to lower commodity tax rates if demand for public goods is more sensitive to income than demand for private goods and (iii) regulation policy is a strategically complement instrument if consumers do not over value product diversity. In the empirical part of the paper, we test our predictions using panel data for 21 OECD countries over the period 1990-2008.

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Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 12-15.

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Date of creation: 2012
Date of revision:
Handle: RePEc:luc:wpaper:12-15
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