Unit Sales and Price Effects of Preannounced Consumption Tax Reforms: Micro-level Evidence from European VAT

Thiess Buettner and Boryana Madzharova
Authors registered in the RePEc Author Service: Thiess Büttner

American Economic Journal: Economic Policy, 2021, vol. 13, issue 3, 103-34

Abstract: We study the effects of consumption tax changes on prices and unit sales of durables utilizing micro-level product data. The results show that tax rate changes are fully shifted into prices. An anticipated tax rate change causes a temporary shift in unit sales shortly before implementation, which is more than offset by adjustments upon and after implementation. If the tax rate increases by 1 percentage point, unit sales rise by 2.5 percent on average in the last month before implementation. The permanent effect is a drop in sales by 2 percent below their original level, implying relatively strong intertemporal substitution effects.

JEL-codes: D12 E21 E62 H24 H25 H31 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (13)

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DOI: 10.1257/pol.20170708

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