Cross-Border Shopping and the Optimum Commodity Tax in a Competitive and a Monopoly Market.
Using a partial equilibrium model, optimality rules for a commodity tax are derived for an economy that is exposed to cross-border shopping. In a competitive market, the conventional inverse elasticity rule is shown to be valid with the qualification that it is the elasticity of domestic rather than total demand that matters. With a foreign monopoly, the inverse elasticity is modified by a tax-shifting effect. When the supplier is a multinational firm, price repercussions abroad should be taken into account. The implications for domestic taxation of the prices and taxes set abroad are also examined. Copyright 1994 by The editors of the Scandinavian Journal of Economics.
Year of publication: |
1994
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Authors: | Christiansen, Vidar |
Published in: |
Scandinavian Journal of Economics. - Wiley Blackwell, ISSN 1467-9442. - Vol. 96.1994, 3, p. 329-41
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Publisher: |
Wiley Blackwell |
Saved in:
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