VAT pass-through and competition: evidence from the Greek Islands

Lydia Dimitrakopoulou, Christos Genakos, Themistoklis Kampouris and Stella Papadokonstantaki

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We examine how competition affects VAT pass-through in isolated oligopolistic markets as defined by the Greek islands. Using daily gasoline prices and a difference-in-differences methodology, we investigate how changes in VAT rates are passed through to consumers in islands with different market structure. We show that pass-through increases with competition, going from 50% in monopoly to around 80% in more competitive markets, but remains incomplete. We also discover a rapid rate of adjustment for VAT changes, as well as a positive relationship between competition and the rate of price adjustment. Finally, we document higher pass-through for products with more inelastic demand.

Keywords: pass-through; tax incidence; gasoline; value added tax (VAT); market structure; competition; Greek islands (search for similar items in EconPapers)
JEL-codes: H22 L1 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2023-05-30
New Economics Papers: this item is included in nep-com, nep-ene, nep-ifn, nep-pbe and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://eprints.lse.ac.uk/121321/ Open access version. (application/pdf)

Related works:
Working Paper: VAT pass-through and competition: evidence from the Greek Islands (2023)
Working Paper: VAT pass-through and competition: Evidence from the Greek Islands (2023)
Working Paper: VAT Pass-Through and Competition: Evidence from the Greek Islands (2023)
Working Paper: VAT Pass-Through and Competition: Evidence from the Greek Islands (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:121321

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