What Goes Up May Not Come Down: Asymmetric Incidence of Value-Added Taxes / Youssef Benzarti, Dorian Carloni, Jarkko Harju, Tuomas Kosonen.

Format:

Book

Author/Creator:

Benzarti, Youssef.

Contributor:

National Bureau of Economic Research.

Carloni, Dorian.

Harju, Jarkko.

Kosonen, Tuomas.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23849.

NBER working paper series no. w23849

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

What Goes Up May Not Come Down

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

This paper shows that prices respond more 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 than 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 more likely to respond asymmetrically to the VAT changes than firms operating with high profit margins. Fourth, this asymmetry persists several years after the VAT changes take place. Fifth, using all VAT changes in the European Union from 1996 to 2015, we find similar levels of asymmetry.

Notes:

Print version record

September 2017.