Destination‐based vs. Origin‐based Commodity Taxation in Large Open Economies with Unemployment

Bibliographic Data

ID9728375
AuthorsFabio Antoniou (0000-0002-6943-8057, University of Ioannina), Panos Hatzipanayotou (0000-0002-7176-1347, Athens University of Economics and Business, and CESifo), Nikos Tsakiris (University of Ioannina)
Year2019
Volume86
Issue341
Pages67-86
Publication date2019-01-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueEconomica (JOURNAL)
Journal identifiersISSN: 0013-0427 • E-ISSN: 1468-0335
PublisherWiley (PUBLISHER • GB)
DOI10.1111/ecca.12235
OpenAlexW3123638058
LanguageEN
Citations received1
References cited25

We construct a perfectly competitive model of two symmetric countries producing tradable commodities and a public consumption good. Destination‐ or origin‐based taxes are levied on the consumption of the tradable goods. In both countries, a fixed wage leads to involuntary unemployment. We derive the Nash equilibrium consumption taxes under the two taxation principles with endogenous world prices, and compare them to (i) the cooperative rates, and (ii) the rates when world prices are fixed. We demonstrate that with endogenous world prices, the induced terms‐of‐trade effects cancel out under the destination principle, but they prevail under the origin principle of taxation. Nash equilibrium destination‐based taxes are inefficiently low when the exporting sector in each country is non‐labour‐intensive. The Nash equilibrium origin‐based taxes can be either higher or lower than the corresponding cooperative rates

Commodity · Consumption (sociology) · Economics · General equilibrium theory · International economics · Macroeconomics · Market economy · Microeconomics · Monetary economics · Nash equilibrium · Unemployment · Economic Policies and Impacts · Fiscal Policy and Economic Growth · Taxation and Compliance Studies

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