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Do Value-Added Taxes Affect International Trade Flows? Evidence from 30 Years of Tax Reforms

Youssef Benzarti () and Alisa Tazhitdinova

No 26195, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper uses all Value Added Tax (VAT) changes across all EU Member States from 1988 to 2016 to estimate the effect of VATs on trade flows. We find small elasticities of trade flows with respect to VATs, in spite of some of the VAT changes being substantial. We estimate substantially smaller responses of trade flows to VATs compared to the responses of trade flows to tariffs estimated in the trade literature. This finding holds across different time periods, countries and types of reforms. Our results imply that VATs are unlikely to distort trade flows.

JEL-codes: F1 F14 H2 H25 (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-int, nep-pbe and nep-pub
Note: ITI PE
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