Can VAT Cuts and Anti-Profiteering Measures Dampen the Effects of Food Price Inflation?

Youssef Benzarti, Santiago Garriga and Dario Tortarolo

No 32241, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study a temporary VAT cut on food, its re-introduction, and anti-profiteering price caps during high inflation in Argentina. Using barcode-level data from over 3,000 supermarkets, we find: (1) in monitored chains, VAT-cut pass-through is near-complete, unlike the incomplete pass-through in less-monitored settings; (2) in unmonitored independents, pass-through is asymmetric—prices rise more after reinstatement than after the cut and stay above pre-cut levels; and (3) caps compress price increases in chains but leave capped prices persistently below pre-cut levels. A consumer surplus model shows the VAT cut was progressive, with caps reducing the asymmetry’s regressive impact.

JEL-codes: H0 (search for similar items in EconPapers)
Date: 2024-03
New Economics Papers: this item is included in nep-agr, nep-pbe and nep-pub
Note: PE
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