Commodity Taxation and International Trade in Imperfect Markets
University of Munich - Seminar for Economic Policy; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Norwegian School of Economics & Business Administration (NHH); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
University of Tuebingen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); University of Adelaide - School of Economics
CESifo Working Paper Series No. 376
This paper studies non-cooperative commodity taxation in a trade model with imperfect competition and trade costs. Nationally optimal tax policy simultaneously tries to correct the domestic distortion from imperfect competition and to shift rents to the home country. Importantly, this trade-off depends qualitatively on the international commodity tax regime in operation. For low levels of trade costs, we show that production-based commodity taxes dominate from a global welfare perspective, but this ranking is reversed in favor of consumption-based taxation when trade costs become sufficiently high.
Number of Pages in PDF File: 33
Keywords: Commodity taxation, imperfect competition, strategic trade policy
JEL Classification: F12, H20working papers series
Date posted: January 28, 2001
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