Economic integration and the choice of commodity tax base with endogenous market structures

Scott McCracken and Frank Staehler ()
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Frank Staehler: Department of Economics, University of Otago
Authors registered in the RePEc Author Service: Frank Stähler

No 701, Working Papers from University of Otago, Department of Economics

Abstract: This paper analyzes the choice of commodity tax base when countries set their taxes non-cooperatively in a two-country symmetric reciprocal dumping model of intra-industry trade with free entry and trade costs. We show that the consumption base (destination principle) dominates the production base (origin principle) when trade costs are high or demand is linear. For lower levels of trade costs and nonlinear demand, the welfare ranking of the two tax bases is ambiguous. Hence, there is no clear preference for a tax principle with an ongoing movement towards closer economic integration.

Keywords: Economic integration; commodity taxation; trade; imperfect competition; endogenous market structures (search for similar items in EconPapers)
JEL-codes: F12 H20 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-02, Revised 2007-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Economic integration and the choice of commodity tax base with endogenous market structures (2010)
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