Devereux, M. P., Lockwood, B. and Redoano, Michela (2007) Horizontal and vertical indirect tax competition: theory and some evidence from the USA. Journal of Public Economics, Vol.91 (No.3-4). pp. 451-479. doi:10.1016/j.jpubeco.2006.07.005

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Abstract

This paper provides a simple but general theoretical framework for analyzing simultaneous vertical and horizontal competition in excise taxes, which includes several previous contributions as special cases. It allows for both elastic individual demand for the taxed good, and cross-border shopping (and smuggling). It then estimates equations informed by the theory on a panel of US state and federal excise taxes on cigarettes and gasoline. The results are generally consistent with the theory, when the characteristics of the markets for the goods are taken into account. Taxes in neighboring states have a significant and large effect in the case of cigarettes. The possibility of smuggling cigarettes from low tax states also plays a role. In the case of gasoline, taxes in neighboring states do not play a significant role; however, there is evidence in this case of vertical competition. (c) 2006 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions
Divisions:	Faculty of Social Sciences > Economics
Journal or Publication Title:	Journal of Public Economics
Publisher:	Elsevier
ISSN:	0047-2727
Official Date:	April 2007
Dates:	Date Event April 2007 Published
Volume:	Vol.91
Number:	No.3-4
Number of Pages:	29
Page Range:	pp. 451-479
DOI:	10.1016/j.jpubeco.2006.07.005
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access

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