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

McCracken, Scott; Stähler, Frank

Abstract

This paper analyzes the choice of commodity tax base when countries set their taxes noncooperatively in a two-country symmetric reciprocal dumping model of intraindustry 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 toward closer economic integration.

Citation

McCracken, S., & Stähler, F. (2010). Economic integration and the choice of commodity tax base with endogenous market structures. International tax and public finance, 17(2), 91-113. https://doi.org/10.1007/s10797-008-9099-3

• Online Publication Date: Jan 28, 2009
• Publication Date: 2010-04
• Deposit Date: Nov 13, 2014
• Publicly Available Date: Nov 13, 2014
• Journal: International tax and public finance
• Print ISSN: 0927-5940
• Publisher: Springer Verlag
• Peer Reviewed: Peer Reviewed
• Volume: 17
• Issue: 2
• Pages: 91-113
• DOI: https://doi.org/10.1007/s10797-008-9099-3
• Keywords: Economic integration, Commodity taxation, Trade, Imperfect competition, Endogenous market structures
• Public URL: https://hull-repository.worktribe.com/output/469412
• Publisher URL: http://link.springer.com/article/10.1007%2Fs10797-008-9099-3
• Additional Information: Author's accepted manuscript of article published in: International tax and public finance, 2010, v.17, issue 2. The final publication is available at Springer via http://dx.doi.org/10.1007/s10797-008-9099-3
• Contract Date: Nov 13, 2014