Resource title

International Commodity Taxation under Monopolistic Competition

Resource image

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Resource description

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.

Resource author

Andreas Haufler, Michael Pflüger

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/18068

Resource license

Adapt according to the presented license agreement and reference the original author.