International commodity taxation in the presence of unemployment

Simone Moriconi and Yasuhiro Sato

Journal of Public Economics, 2009, vol. 93, issue 7-8, 939-949

Abstract: In this paper, we evaluate the impact of commodity tax competition on welfare and employment under the destination and origin principles, when the labor market is imperfectly competitive owing to a binding fixed wage. Our main finding is that commodity taxation causes an employment externality whose signs may be opposite under the two principles. While tax competition leads to inefficient tax rates under both principles, we also prove that the origin principle guarantees lower unemployment and higher welfare when the fixed wage is high. Finally, we show that the employment externality still exists in a standard union model of wage determination.

Keywords: Commodity; taxation; Destination; principle; Origin; principle; Unemployment; Employment; externality (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (15)

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Working Paper: International commodity taxation in the presence of unemployment (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:93:y:2009:i:7-8:p:939-949

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