The Role of Market Structure and Timing in Determining VAT Pass-Through
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Summary:
We examine the role of market characteristics and timing in explaining observed heterogeneity in VAT pass-through. We first extend existing theory to characterize the roles of imperfect competition and product differentiation, then investigate these relationships empirically using a panel of 14 Eurozone countries between 1999 and 2013. We find important roles for product market regulation and product quality, and little impact of advance announcement of reforms. Our findings have important implications for policy-makers considering VAT rate adjustments, by illuminating which of the consumers or the producers would experience the brunt of a reform across different settings.
Series:
Working Paper No. 2021/061
Subject:
Commodity markets Competition Consumer prices Consumption Economic sectors Financial crises Financial markets National accounts Prices Taxes Value-added tax
Frequency:
regular
English
Publication Date:
March 5, 2021
ISBN/ISSN:
9781513571546/1018-5941
Stock No:
WPIEA2021061
Pages:
56
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