Endogenous choice on tax instruments in a tax competition model: unit tax versus ad valorem tax

Akai, Nobuo; Ogawa, Hideoki; Ogawa, Yoshitomo

doi:10.1007/s10797-011-9170-3

Cited by 15 publications

(7 citation statements)

References 11 publications

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“…3 The choice between ad valorem tax and unit tax in a capital tax competition model was examined in Akai et al (2011) andLockwood (2004), which show that unit tax competition is superior to ad valorem tax competition, and selecting the unit tax method is a dominant strategy for governments. The choice of tax method was also examined in a tariff war model by Jorgensen and Schröder (2005) and Lockwood and Wong (2000).…”

Section: Introductionmentioning

confidence: 99%

Unit tax versus ad valorem tax: A tax competition model with cross-border shopping

Aiura¹,

Ogawa²

2013

Journal of Public Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWithin the framework of spatial tax competition with cross-border shopping, we examine the choice of tax method between ad valorem tax and unit (specific) tax. The paper shows that governments endogenously choose ad valorem tax not because of a classic welfare reason, but because it is a good strategy in competing for mobile customers. Another key finding is that while governments are committed to the ad valorem tax method, the choice is not efficient; Tax-cutting competition becomes more serious when countries adopt ad valorem tax, and competition in ad valorem tax yields smaller payoffs than competition in unit tax.

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Section: Introductionmentioning

confidence: 99%

Unit tax versus ad valorem tax: A tax competition model with cross-border shopping

Aiura¹,

Ogawa²

2013

Journal of Public Economics

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“…In most of the conventional literature, the tax methods are compared within a single-country framework in which consumers are forced to buy a domestic product irrespective of the level of prices and taxes. In contrast, more recent studies have considered cross-border shopping, trade, firm relocation, and capital mobility in a two-country model when analyzing the effects of a unit tax and an ADV tax [Lockwood and Wong (2000), Lockwood (2004), Jorgensen and Schröder (2005), Akai et al (2011), Takatsuka (2013), Aiura and Ogawa (2013), and Akai et al (2014)]. 3 1 For example, Delipalla and Keen (1992), Skeath and Trandel (1994), Myles (1996), Denicoló and Matteuzzei (2000), Anderson et al (2001), and Blackorby and Murty (2007) examined non-equivalence of unit and ADV taxes in a monopoly and in an oligopoly.…”

Section: Introductionmentioning

confidence: 99%

“…3 Using a model of inter-regional capital tax competition, Lockwood (2004) and Akai et al (2011) show that a unit tax is superior to an ADV tax and that selecting the unit tax method is a dominant strategy for governments. Lockwood and Wong (2000) compare the effects of a unit tax and an ADV tax in the tariff-war model and demonstrate the superiority of the ADV tariff.…”

Section: Introductionmentioning

confidence: 99%

Indirect taxes in a cross-border shopping model: a monopolistic competition approach

Aiura

Ogawa

2019

J Econ

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Within the framework of cross-border shopping with monopolistic competition, we examine the relative merits of an ad valorem (ADV) tax and a unit (specific) tax as indirect tax methods. Our study focuses on how the opening of borders and the entry of firms affect the equilibrium under each tax method. Our findings reveal that the ADV tax method is superior to the unit tax method in terms of tax revenue and welfare. In addition, while the entry of firms and opening of borders reduce the dominance of tax revenue under the ADV tax method, they increase the method's merits from a welfare perspective.

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“…Cheung (1998), Schröder (2004 and Dröge and Schröder (2009) assume monopolistic competition; Delipalla and Keen (1992), Denicolò and Matteuzzi (2000), Anderson et al (2001), Hamilton (2009), andLapan andHennessy (2011) inter alia focus on oligopolies, Kind et al (2009) on two-sided markets and Hamilton (1999) on a monopsony, while Grazzini (2006) and Blackorby and Murty (2007) investigate general equilibrium settings. Within a framework of tax competition, Lockwood (2004) and Akai et al (2011) compare ad valorem and unit taxes, while Hoffmann and Runkel (2012) compare profit and unit taxes. Finally, Keen (1998) provides a comprehensive survey of contributions.…”

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confidence: 99%

Failure of ad valorem and specific tax equivalence under uncertainty

Goerke

Herzberg

Upmann

2014

Int J of Economic Theory

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Applying a framework of perfect competition under uncertainty, we contribute to the discussion of whether or not ad valorem taxes and specific taxes are equivalent. While this equivalence holds without price uncertainty, we show that ad valorem taxes and specific taxes are "almost never" equivalent in the presence of uncertainty if we demand equivalence to hold pathwise. Since we obtain this result under perfect competition, our analysis also provides a further rationale for why the equivalence must fail under imperfect competition. Terms of use: Documents in EconStor mayJEL-Code: H200, H210, H610.

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Endogenous choice on tax instruments in a tax competition model: unit tax versus ad valorem tax

Cited by 15 publications

References 11 publications

Unit tax versus ad valorem tax: A tax competition model with cross-border shopping

Unit tax versus ad valorem tax: A tax competition model with cross-border shopping

Indirect taxes in a cross-border shopping model: a monopolistic competition approach

Failure of ad valorem and specific tax equivalence under uncertainty

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