 Consumption Responses and Redistributive Implications of Luxury Durable Tax RebatesTanisa Tawichsri No 99, PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research Abstract: This paper evaluates the impact of tax rebates on luxury durables, using Thailand's 2011 car tax rebate as a case study. Utilizing a stochastic dynamic model with heterogeneous agents, where cars serve as both luxury goods and illiquid assets, the study finds that the policy effectively boosted consumption by targeting households with a high propensity to spend. However, it was regressive, primarily benefiting high-income households and leading to prolonged negative effects on household spending and saving. Additionally, the policy caused second-hand car prices to drop. This enabled lower-income households to purchase used cars at lower costs, but further prolonged and deepened cuts in non-durable spending and savings. The estimated Elasticity of Intertemporal Substitution (EIS) for Thailand is 0.2, with higher EIS observed among wealthier and older households. Keywords: Durable goods; Luxury goods; Elasticity of intertemporal substitution; Buffer-stock models; Illiquid assets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pui:dpaper:99 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research Contact information at EDIRC. |
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