Vertical Integration and Production Inefficiency in the Presence of a Gross Receipts Tax

Benjamin Hansen, Keaton S. Miller and Caroline Weber ()

No 28478, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We quantify the effects of a gross receipts tax (GRT) on vertical integration for the first time. We use data from the Washington state recreational cannabis industry, which has numerous advantages including a clean natural experiment: a 25% GRT imposed on cannabis firms was subsequently replaced by an excise tax at retail. We find the short-run elasticity of vertical integration with respect to the intermediate good net- of-tax rate is -0.15 and the long-run elasticity is more than twice as large. We find these incentives lead to large output losses – production increases by 23 percent when the GRT is eliminated.

JEL-codes: H21 H25 H26 H30 H71 I28 L51 L6 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-ind and nep-pub
Note: EH IO PE
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Published as Benjamin Hansen & Keaton Miller & Caroline Weber, 2022. "Vertical integration and production inefficiency in the presence of a gross receipts tax," Journal of Public Economics, vol 212.

Downloads: (external link)
http://www.nber.org/papers/w28478.pdf (application/pdf)

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:nbr:nberwo:28478

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w28478

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().