Signaling Through Taxing America’s Sin: A Panel Data Study

Erik Brockwell ()
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Erik Brockwell: Umeå University, Postal: Department of Economics, Umeå University, S-901 87 Umeå, http://www.cere.se

No 2014:4, CERE Working Papers from CERE - the Center for Environmental and Resource Economics

Abstract: This article aims to examine how sin taxation changes long-term consumer behavior regarding commodities which are deemed harmful for both health and the environment. These include tobacco, alcoholic beverages, sugar and confectionary, household energy, and motor fuel. Specifically, we examine the signaling effect from taxation which is seen if a tax increase leads to a significantly larger change in consumption than a producer price change. The empirical analysis is conducted by a US panel data study, during the period 1988-2012 for the four US census regions, using the Almost Ideal Demand System (AIDS). We find the main result to be that the signaling effect from taxation is significant for tobacco (at the 10% significance level) as well as for electricity and motor fuel (at the 5% significance level).

Keywords: taxation; signaling; public policy; regulation; legislation; almost ideal demand system; panel data (search for similar items in EconPapers)
JEL-codes: C23 D12 H23 I18 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014-06-30
New Economics Papers: this item is included in nep-ene and nep-reg
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Citations: View citations in EconPapers (2)

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