What Goes Up May Not Come Down
Asymmetric Incidence of Value-Added Taxes
Bibliographic Data
| ID | 10178036 |
|---|---|
| Authors | Youssef Benzarti (National Bureau of Economic Research), Dorian Carloni (0000-0003-1006-8650, Congressional Budget Office), Jarkko Harju (0000-0003-2027-4343, VATT Institute for Economic Research), Tuomas Kosonen (Labour Institute for Economic Research) |
| Year | 2020 |
| Volume | 128 |
| Issue | 12 |
| Pages | 4438-4474 |
| Publication date | 2020-06-29 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/710558 |
| OpenAlex | W2759183791 |
| Language | EN |
| Citations received | 12 |
| References cited | 20 |
This paper shows that prices respond more to increases than to decreases in Value-Added Taxes (VATs). First, using all VAT reforms from 1996 to 2015 across all European countries we show that prices respond 3 to 4 times more to VAT increases than decreases. Second, using a plausibly exogenous VAT reform, we show that the asymmetry persists over several years. Third, we document several empirical features of this asymmetry that are inconsistent with the standard incidence model. We provide evidence consistent with firm behavior driving the asymmetry. Additionally, according to our empirical results, due to asymmetric pass-through to prices, firms benefit from VAT changes to opposite directions in the form of higher profits
Asymmetry · Economics · European union · International economics · Microeconomics · Monetary economics · Value (mathematics · Corporate Taxation and Avoidance · Fiscal Policy and Economic Growth · Taxation and Compliance Studies
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| Unique citing works | 12 |
|---|---|
| Citations per year | 2,4 |
| Citation span | 2021 - 2026 (6) |
| Citation velocity | current |
| Highly cited | No |
| Citation types | Neutral: 12 |