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Cross-Border Shopping and the Atkinson-Stiglitz Theorem

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  • Sebastian G. Kessing
  • Bernhard Koldert

Abstract

We introduce cross-border shopping and indirect tax competition into a model of optimal taxation. The Atkinson-Stiglitz result that indirect taxation cannot improve the effciency of information-constrained tax-transfer policies, and that indirect taxes should not be differentiated across goods, is shown to hold in this case. This result is derived for symmetric as well as for asymmetric countries. However, if the tax system must contain elements of indirect taxation, differentiated indirect tax rates arise in the equilibrium and restricting differentiated indirect taxation can be welfare-increasing.

Suggested Citation

  • Sebastian G. Kessing & Bernhard Koldert, 2012. "Cross-Border Shopping and the Atkinson-Stiglitz Theorem," Volkswirtschaftliche Diskussionsbeiträge 158-12, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    • Handle: RePEc:sie:siegen:158-12
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    Cited by:

    1. John T. Revesz, 2014. "A Numerical Model of Optimal Differentiated Indirect Taxation," Hacienda Pública Española / Review of Public Economics, IEF, vol. 211(4), pages 9-66, December.

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    More about this item

    Keywords

    Cross-border shopping; Atkinson-Stiglitz theorem; tax competition; direct and indirect taxes;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • F15 - International Economics - - Trade - - - Economic Integration

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