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Economic integration and the choice of commodity tax base with endogenous market structures

McCracken, Scott; Stahler, Frank


This paper analyzes the choice of commodity tax base when countries set their taxes noncooperatively in a two-country symmetric reciprocal dumping model of intraindustry trade with free entry and trade costs. We show that the consumption base (destination principle) dominates the production base (origin principle) when trade costs are high or demand is linear. For lower levels of trade costs and nonlinear demand, the welfare ranking of the two tax bases is ambiguous. Hence, there is no clear...[Show more]

CollectionsANU Research Publications
Date published: 2010
Type: Journal article
Source: International Tax and Public Finance
DOI: 10.1007/s10797-008-9099-3


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