Tax reforms and Google searches: the case of Spanish VAT reforms during the great recession

Joaquín Artés, Ana Melissa Botello Mainieri and A. Jesús Sánchez-Fuentes ()
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Joaquín Artés: Instituto Complutense de Estudios Internacionales, Universidad Complutense de Madrid (UCM)
Ana Melissa Botello Mainieri: Universidad Complutense de Madrid (UCM)
A. Jesús Sánchez-Fuentes: Instituto Complutense de Estudios Internacionales, Universidad Complutense de Madrid (UCM)
Authors registered in the RePEc Author Service: Antonio Jesus Sanchez Fuentes ()

SERIEs: Journal of the Spanish Economic Association, 2019, vol. 10, issue 3, No 5, 336 pages

Abstract: Abstract We propose a method to capture the effect of tax reforms on consumer’s readiness to buy using Google searches as a proxy. We use the Spanish 2010 and 2012 VAT reforms as a case of study. We use a regression discontinuity design taking advantage of the fact that the Spanish 2010 and 2012 VAT reforms had a sharp implementation date, which implies that from one day to another the tax rate for most goods was different, while other factors likely to influence consumer behaviour were similar on the days around the cut-off. We find a significant causal effect of the implementation of the reform on Google searches of durable goods, while we do not find any effect for non-durable goods. These results are in line with previous theoretical and empirical evidence according to which tax reforms cause consumers to modify more their readiness to buy durable goods. We also explore the effect of the reforms on readiness to buy specific goods such as movie tickets by taking advantage of a control group formed by similar leisure items that were unaffected by the 2012 reform.

Keywords: Private consumption; Value-added tax; Indirect taxation; Unconventional fiscal policy; Google Trends; Big data (search for similar items in EconPapers)
JEL-codes: D04 H3 H43 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s13209-019-00204-1

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