Please use this identifier to cite or link to this item:
Haufler, Andreas
Year of Publication: 
Series/Report no.: 
Diskussionsbeiträge: Serie II, Sonderforschungsbereich 178 "Internationalisierung der Wirtschaft", Universität Konstanz 295
A widely noticed result by de Crombrugghe and Tulkens (1990) states that asymmetric commodity tax competition always leads to tax rates being too low in both countries, even though there are counteracting tax base and terms of trade effects. This note argues that the result depends crucially on the assumption that welfare in the high-tax region is concave in the tax rate of the low-tax country and shows that this assumption cannot generally be met in the underlying Mintz and Tulkens (1986) model. It is also shown that a tax increase in the low-tax country will hurt the high-tax region when the marginal transaction cost schedule is sufficiently elastic with respect to the level of cross-border shopping.
commodity tax competition
fiscal externalities
Document Type: 
Working Paper
Social Media Mentions:

Files in This Item:
629.92 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.