EconPapers    
Economics at your fingertips  
 

Heterogeneity in the tax pass-through to spirit retail prices: Evidence from Belgium

Jean Hindriks () and Valerio Serse ()

Journal of Public Economics, 2019, vol. 176, issue C, 142-160

Abstract: On 1st November 2015, the Belgian government increased the excise tax on alcoholic beverages. For spirits with 40% of alcohol and bottle size of 70 cl, this tax change is equivalent to an amount of 2,43 € per bottle of spirits. This paper studies the impact of this tax reform at the store level on the (posted) retail price of six major brands of spirits, using a difference-in-differences method. The estimation is based on a balanced panel of scanner data from a major supermarket chain (with a 33% market share) and uses the retail prices of the same brands sold in France by the same supermarket chain as a control group. Having information on each store location, we show spatial variations in the tax pass-through for homogeneous products. We find that these variations are strongly related to the intensity of local competition and to a lesser extent to the proximity to the borders (mainly with Luxembourg which is the low-price country). We find that the tax was quickly passed through during the first month of tax implementation and that it was mostly over-shifted. However, we also find that both the border and the competition effects are not instantaneous, but arise several months after the tax reform. These findings have important implications for alcohol control policies as they highlight that the incidence of alcohol taxation can vary greatly across space and affect differently households depending on where they live.

Keywords: Tax pass-through; Scanner data; Competition; Cross-border shopping (search for similar items in EconPapers)
JEL-codes: H2 H22 H32 H71 I18 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272719300933
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Heterogeneity in the tax pass-through to spirit retail prices: Evidence from Belgium (2018) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:176:y:2019:i:c:p:142-160

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-11-18
Handle: RePEc:eee:pubeco:v:176:y:2019:i:c:p:142-160