Original paper
What Goes Up May Not Come Down: Asymmetric Incidence of Value-Added Taxes
Abstract
This paper provides evidence that prices respond significantly more strongly to increases than to decreases in value-added taxes (VATs). First, using two plausibly exogenous VAT changes, we show that prices respond twice as much to VAT increases as to VAT decreases. Second, we show that this asymmetry results in higher equilibrium profits and markups. Third, we find that firms operating with low profit margins are particularly likely to respond...
Figures & Tables
Figure 1: Finnish Hairdressing Sector VAT Reforms
Figure 2: Proportion of Prices Changed by Hairdresser
Figure 5a plots the coefficients from a regression of log profits on year dummie...
Figure D.10: Summary Statistics: Economic Conditions
Figure D.11: Summary Statistics: Size and Timing
Figure D.12: Finnish Hairdressing VAT Reforms Pass-Through Distributions With Co...
Figure D.17: Markup Changes and Price Changes
Figure D.18: Finnish Hairdressing Reforms: Investments
Paper Details
Title
What Goes Up May Not Come Down: Asymmetric Incidence of Value-Added Taxes
Published Date
Jun 29, 2020
Journal
Volume
128
Issue
12
Pages
4438 - 4474
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