Unit Sales and Price Effects of Preannounced Consumption Tax Reforms: Micro-level Evidence from European VAT
- (pp. 103-34)
Abstract
We study the effects of consumption tax changes on prices and unit sales of durables utilizing micro-level product data. The results show that tax rate changes are fully shifted into prices. An anticipated tax rate change causes a temporary shift in unit sales shortly before implementation, which is more than offset by adjustments upon and after implementation. If the tax rate increases by 1 percentage point, unit sales rise by 2.5 percent on average in the last month before implementation. The permanent effect is a drop in sales by 2 percent below their original level, implying relatively strong intertemporal substitution effects.Citation
Buettner, Thiess, and Boryana Madzharova. 2021. "Unit Sales and Price Effects of Preannounced Consumption Tax Reforms: Micro-level Evidence from European VAT." American Economic Journal: Economic Policy, 13 (3): 103-34. DOI: 10.1257/pol.20170708Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- E21 Macroeconomics: Consumption; Saving; Wealth
- E62 Fiscal Policy
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H31 Fiscal Policies and Behavior of Economic Agents: Household
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