What Goes Up May Not Come Down: Asymmetric Incidence of Value-Added Taxes
Tuomas Kosonen (),
Youssef Benzarti (),
Dorian Carloni and
Jarkko Harju ()
Additional contact information
Tuomas Kosonen: Palkansaajien tutkimuslaitos
No 317, Working Papers from Palkansaajien tutkimuslaitos, Labour Institute for Economic Research
This paper shows that prices respond more to increases than to decreases in Value-Added Taxes (VATs). First, using all VAT reforms from 1996 to 2015 across all European countries we show that prices respond 3 to 4 times more to VAT increases than decreases. Second, using a plausibly exogenous VAT reform, we show that the asymmetry persists over several years. Third, we document several empirical features of this asymmetry that are inconsistent with the standard incidence model. We provide evidence consistent with firm behavior driving the asymmetry. Additionally, according to our empirical results, due to asymmetric pass-through to prices, firms benefit from VAT changes to opposite directions in the form of higher profits.
Keywords: value-added taxes; incidence; redistribution; asymmetry (search for similar items in EconPapers)
JEL-codes: H20 H22 H23 (search for similar items in EconPapers)
Pages: 70 pages
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
https://labour.fi/wp-content/uploads/2020/02/Tyopaperi317.pdf First version, 2017 (application/pdf)
Journal Article: What Goes Up May Not Come Down: Asymmetric Incidence of Value-Added Taxes (2020)
Working Paper: What Goes Up May Not Come Down: Asymmetric Incidence of Value-Added Taxes (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pst:wpaper:317
Access Statistics for this paper
More papers in Working Papers from Palkansaajien tutkimuslaitos, Labour Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Jaana Toivainen ().