The paper analyzes the implications of allowing for trade deflection under the restricted origin principle. It is shown that (a) producer trade deflection leads to circular trade and must be ruled out to obtain a trade equilibrium, (b) consumer trade deflection will not occur in a Nash...

We analyze the restricted origin principle for taxing international trade in a three-country, three-commodity model where two of the countries form an economic union. Using simplifying assumptions with respect to the initial tax equilibrium and the structure of preferences, the effects of a...

A two-sector trade model with perfect international capital mobility and endogenous supply of specific factors is used to analyze the relation between selective taxes on production (origin-based commodity taxes) and source-based taxes on capital income. A small open economy will set both of...