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Optimal Commodity Taxes for Norway with Cross-Border Shopping

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  • Odd Erik Nygård

Abstract

An empirically based simulation model consisting of a representative consumer is constructed and calibrated, for the purpose of finding optimal commodity taxes for Norway. The model includes endogenous labor supply and cross-border shopping. Focusing on commodities exposed to cross-border shopping, such as alcoholic beverages, tobacco, and food, optimal commodity taxes are computed conditional on the preexisting wage income tax and nonlabor income. The optimal tax structure is highly differentiated. Compared to the actual tax rates for Norway in the base year 2006, almost all tax rates on commodities exposed to cross-border shopping increase, the exception being the one on tobacco. The analysis demonstrates a considerable effect of making cross-border shopping or labor supply endogenous on the optimal tax structure.

Suggested Citation

  • Odd Erik Nygård, 2014. "Optimal Commodity Taxes for Norway with Cross-Border Shopping," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(2), pages 316-342, June.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201406)70:2_316:octfnw_2.0.tx_2-k
    DOI: 10.1628/001522108X681397
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    References listed on IDEAS

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    More about this item

    Keywords

    optimal commodity taxes; indirect taxes; consumer demand; cross-border shopping; external effects;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • F10 - International Economics - - Trade - - - General

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