Cheaper and More Haircuts After VAT Cut? Evidence from the Netherlands

Egbert Jongen (), Arjan Lejour and Gabriella Massenz
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Egbert Jongen: CPB Netherlands Bureau for Economic Policy Analysis, Leiden University and IZA

De Economist, 2018, vol. 166, issue 2, No 1, 135-154

Abstract: Abstract We study the effect of the reduction in the VAT rate on hairdresser services from 17.5 to 6% in the Netherlands in January 2000. Following Kosonen (J Public Econ 131:87–100, 2015), we use differences-in-differences to estimate the effects of this reform, with beauty salons as the main control group. In our preferred specification, we find close to full pass-through of the VAT cut into lower prices. However, we find no statistically or economically significant effect on the volume of sales or employment.

Keywords: VAT reform; Hairdressers; Differences-in-differences; Netherlands (search for similar items in EconPapers)
JEL-codes: C33 H22 H25 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10645-018-9315-1

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