Tuesday Seminar: Nicolas DJOB LI NGUE BIKOB

Abstract: This paper examines the optimal structure of commodity taxation in an open economy characterized by firm mobility and labor market segmentation. We develop a two-country general equilibrium model with monopolistic competition, endogenous firm relocation, and a dual labor market in which skilled workers earn flexible wages while unskilled workers face wage rigidity. Within this framework, we compare the welfare implications of two competing tax principles: the destination principle (taxation at the point of consumption) and the origin principle (taxation at the point of production). Our central finding is the existence of a threshold condition: when the share of production income accruing to skilled labor exceeds 50%, the origin principle Pareto dominates in a non-cooperative setting; otherwise, the destination principle yields superior outcomes. This result offers a tractable, empirically grounded decision rule based on observable labor market parameters and sheds new light on the design of international tax coordination mechanisms.