VAT Pass-Through: The Case of a Large and Permanent Reduction in the Market for Menstrual Hygiene Products
Alisa Frey and
No 9962, CESifo Working Paper Series from CESifo
This paper is about the price effects caused by a VAT (value-added tax) reduction for menstrual hygiene products in Germany. Several aspects make this VAT reduction particularly interesting: The exogeneity of the reduction under otherwise constant economic conditions, the reduction was substantial and permanent, demand for the products is inelastic and in many cases, pass-through rates are more than 100 percent. We find that the VAT reduction is completely passed through to consumers. Despite this complete pass-through, we still detect a significant effect of retailer competition: When more retailers offer a product, the price reduction is larger.
Keywords: VAT reduction; pass-through; hygiene products; retailer competition (search for similar items in EconPapers)
JEL-codes: H22 H25 H32 K34 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9962
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