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Horizontal and vertical indirect tax competition: theory and some evidence from the USA
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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 ISSN 0047-2727.
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Official URL: http://dx.doi.org/10.1016/j.jpubeco.2006.07.005
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 | ||||
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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: |
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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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