Indirect Taxes in the Cross-border Shopping Model: A Monopolistic Competition Approach

Hiroshi Aiura and Hikaru Ogawa
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Hiroshi Aiura: Faculty of Economics, Oita University

No CIRJE-F-1014, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: Within the framework of cross-border shopping with monopolistic competition, we examine the relative merits of an ad valorem (ADV) tax and a unit (speci c) tax as indirect tax methods. Our study focuses on how the opening of borders and the entry of rms affect the equilibrium under each tax method. Our ndings reveal that the ADV tax method is superior to the unit tax method in terms of tax revenue and welfare. In addition, while the entry of rms and opening of borders reduce the dominance of tax revenue under the ADV tax method, they increase the method's merits from a welfare perspective.

Pages: 31 pages
Date: 2016-05
New Economics Papers: this item is included in nep-acc
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Journal Article: Indirect taxes in a cross-border shopping model: a monopolistic competition approach (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2016cf1014

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