International Commodity Taxation under Monopolistic Competition

Andreas Haufler and Michael Pflüger

No 332, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We analyze non-cooperative commodity taxation in a two-country trade model characterized by monopolistic competition and international firm and capital mobility. In this setting, taxes in one country affect foreign welfare through the relocation of mobile firms and through changes in the rents accruing to capital owners. With consumption-based taxation, these fiscal externalities exactly offset each other and the non-cooperative tax equilibrium is Pareto efficient. With production-based taxation, however, there are additional externalities on the foreign tax base and the foreign price level which lead non-cooperative tax rates to exceed their Pareto efficient levels.

Keywords: tax competition; market imperfections; international trade (search for similar items in EconPapers)
JEL-codes: F12 H21 H87 (search for similar items in EconPapers)
Pages: 30 p.
Date: 2003
New Economics Papers: this item is included in nep-mac and nep-pub
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: International Commodity Taxation under Monopolistic Competition (2004)
Working Paper: International commodity taxation under monopolistic competition (2004)
Working Paper: International Commodity Taxation under Monopolistic Competition (2003)
Working Paper: International Commodity Taxation Under Monopolistic Competition (2001)
Working Paper: International Commodity Taxation under Monopolistic Competition (2001)
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