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Commodity tax competition and industry location under the destination - and the origin - principle

Kristian Behrens (behrens.kristian@uqam.ca), Jonathan Hamilton (hamilton@ufl.edu) and Gianmarco Ottaviano

No 2007020, Discussion Papers (ECON - Département des Sciences Economiques) from Université catholique de Louvain, Département des Sciences Economiques

Abstract: We develop a model of commodity tax competition with monopolistically competitive internationally mobile firms, transport costs, and asymmetric country sizes. We investigate the impacts of non-cooperative tax setting, as well as of tax harmonization and changes in the tax principle, in both the short and the long run. The origin principle, when compared to the destination principle, is shown to exacerbate tax competition and to erode tax revenues, yet leads to a more equal spatial distribution of economic activity. This suggests that federations which care about spatial inequality, like the European Union, face a non-trivial- choice for their tax principle that goes beyond the standard considerations of tax revenue redistribution.

Keywords: commodity tax competitions; origin principle; destination principle; tax harmonization; industry location (search for similar items in EconPapers)
JEL-codes: F12 H22 H87 R12 (search for similar items in EconPapers)
Pages: 41
Date: 2007-07-01
New Economics Papers: this item is included in nep-geo, nep-pbe, nep-pub and nep-ure
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Commodity tax competition and industry location under the destination and the origin principle (2009) Downloads
Working Paper: Commodity tax competition and industry location under the destination and the origin principle (2009)
Working Paper: Commodity tax competition and industry location under the destination- and the origin-principle (2007) Downloads
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