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When are origin and destination regimes equivalent?

By David de Meza, Ben Lockwood and Gareth D. Myles

Abstract

A series of equivalence results are established which show that a switch from a destination regime of commodity taxation to an origin regime has no real effects. These significantly generalize those in the existing literature. Assuming uniformity of taxes within each country, equivalence applies (1) in a general competitive economy with an arbitrary (finite) number of goods and factors of production, arbitrary factor taxes, and arbitrary transport costs; (2) in an imperfectly competitive economy with any form of imperfect competition and with transport costs; and (3) in monetary economies where there is some price rigidity (such as nominal wage rigidity) as long as the exchange rate is flexible. Conditions under which nonequivalence applies are also identified and discussed

Topics: HB Economic Theory
Publisher: Kluwer Academic Press
Year: 1994
DOI identifier: 10.1007/BF00874086
OAI identifier: oai:eprints.lse.ac.uk:35757
Provided by: LSE Research Online
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