Commodity tax competition and industry location under the destination and the origin principle
(2009) Regional Science and Urban Economics — Vol. 39, n° 4, p. 422-433 (2009)
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- Authors
- Abstract
- 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 short and the long run. The origin principle, when compared to the destination principle, is shown to exacerbate tax competition and to erode tax revenues, yet leads to a more equal spatial distribution of economic activity. This suggests that federations which care about spatial inequality, like the European Union, face a non-trivial choice for their tax principle that goes beyond the standard considerations of tax revenue redistribution.
- Affiliations
Université du Québec à Montréal Département des sciences économiques University of Bologna Department of Economics University of Florida Department of Economics
Citations
Behrens, K., Ottaviano, G., Hamilton, J., & Thisse, J.-F. (2009). Commodity tax competition and industry location under the destination and the origin principle. Regional Science and Urban Economics, 39(4), 422-433. https://hdl.handle.net/2078.5/249833 (Original work published 2009)