A simple benchmark case is established to derive the optimum commodity tax on an externality-generating good that may be purchased abroad directly by domestic consumers. As the tax should under-cut the Pigovian level, this simple case supports the intuition that taxes should be moderated when...

A simple benchmark case is established to derive the optimum commodity tax on an externality-generating good that may be purchased abroad directly by domestic consumers. As the tax should under-cut the Pigovian level, this simple case supports the intuition that taxes should be moderated when...