Indirect taxation in consumer search markets: The case of retail fuel

Kai Fischer, Simon Martin and Philipp Schmidt-Dengler

No 19095, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: When consumers have heterogeneous access to information about prices, they face different observed price distributions and thus possibly different effective pass-through rates. We estimate a model of consumer search using data from the German retail fuel market. We find that informed consumers face higher effective pass-through rates, with important distributional implications for regulatory and tax policies. Lowering the VAT rate from 19% to 16% decreases transaction prices by 1.9% on average, but disproportionally benefits consumers in high-income markets. We further show that a tax-revenue-equivalent excise tax reduction would have benefited consumers more than a VAT cut, thus generalizing known results in public economics to markets with imperfect information.

JEL-codes: D22 D83 H21 L11 L15 L81 (search for similar items in EconPapers)
Date: 2024-05
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP19095 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
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:cpr:ceprdp:19095

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP19095

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().