We develop a model of commodity tax competition with monopolistically competitive internationally mobile firms, transport costs, and asymmetric country sizes. We investigate the impacts of non-cooperative tax setting, as well as of tax harmonization and changes in the tax principle, in both the...

This paper analyses the effect of consumption taxes on unemployment in presence of wage rigidity and compares non-cooperative tax setting under the destination and origin principle of commodity taxation. We show that, in a two country economy, consumption taxes negatively affect domestic...