Tax competition and the creation of redundant products

Charles de Bartolome ()

Canadian Journal of Economics, 2007, vol. 40, issue 4, 1213-1236

Abstract: There are products that are assembled from kits but that, once assembled, are identical to other products. An example is the roll-your-own cigarette. Because the kit requires time to assemble, it is more costly than the assembled product; in the absence of tax competition, the kit is not bought or is `redundant.' I show that tax competition between regions supports strategies that tax the `redundant' product at a lower tax rate than its assembled counterpart, and it is bought. A welfare loss is thereby created.

JEL-codes: H71 (search for similar items in EconPapers)
Date: 2007
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