Spatial Competition and Pass-through of Fuel Taxes: Evidence from a Quasi-natural Experiment in Germany

Frederik von Waldow and Heike Link

No 2086, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper analyses the pass-through rates and their determinants of the temporary German fuel discount in 2022 at its start and its termination. Based on a unique dataset of fuel station characteristics and prices, we employ a Regression Discontinuity in Time (RDiT) methodology to estimate heterogeneous pass-through rates. Our main contribution is to identify the impact of horizontal and vertical market structures on the extent to which taxes are passed on to consumers. While competitive pressure is positively associated with the response of prices to tax changes, we estimate lower pass-through predominantly for more isolated stations with fewer competitors. Furthermore, our results indicate that independence from upstream markets is accompanied by a reduced pass-through of tax changes suggesting the existence of double marginalization.

Keywords: Gasoline prices; local competition; tax pass-through; regression discontinuity in time (search for similar items in EconPapers)
JEL-codes: H22 L13 Q48 (search for similar items in EconPapers)
Pages: 43 p.
Date: 2024
New Economics Papers: this item is included in nep-com, nep-ene, nep-ind, nep-inv, nep-tre and nep-ure
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