Possibilities for the exportation of production taxes: A general equilibrium analysis

This paper re-evaluates previous discussions of inter-regional tax incidence and tax exportation. A two region general equilibrium model is developed that allows for inter-regional capital mobility and explicit commodity price determination, where one of the two regions is incompletely specialized. Conditions are determined under which either region will be able to export a production tax. Also, the link between tax exportation and the welfare of the taxing region is analyzed. In the case where taxes are not equal to zero initially, tax exportation may be inadvisable even when it is possible.