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Gains from Trade in Tax Revenue and the Efficiency Case for Trade Taxes

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  • Jeremy Edwards

Abstract

The paper analyses the gains from trade in distortionary tax revenue between countries, focussing on the case where lump-sum reveue transfers are restricted. In this case, trade taxes can be used to transfer government revenue between countries, and such taxes will typically be used in Pareto-efficient international equilibria. Global production efficiency conditions are often, though not always, satisfied at Pareto-efficient allocations involving trade taxes, but the implications for international taxation differ from those that have been put forward on the basis of the Diamond-mirrlees production efficiency theorem.

Suggested Citation

  • Jeremy Edwards, 2003. "Gains from Trade in Tax Revenue and the Efficiency Case for Trade Taxes," CESifo Working Paper Series 897, CESifo.
  • Handle: RePEc:ces:ceswps:_897
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    References listed on IDEAS

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    1. Michael Keen & David E. Wildasin, 2000. "Pareto Efficiency in International Taxation," CESifo Working Paper Series 371, CESifo.
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    3. Panzar, John C & Willig, Robert D, 1976. "Vindication of a "Common Mistake" in Welfare Economics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1361-1363, December.
    4. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    5. Auerbach, Alan J., 1985. "The theory of excess burden and optimal taxation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127, Elsevier.
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