Dimitrakopoulou, Lydia, Genakos, Christos, Kampouris, Themistoklis and Papadokonstantaki, Stella (2023) VAT pass-through and competition: evidence from the Greek Islands. CEP Discussion Papers (CEPDP1923). London School of Economics and Political Science. Centre for Economic Performance, London, UK.
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Abstract
We examine how competition affects VAT pass-through in isolated oligopolistic markets as defined by the Greek islands. Using daily gasoline prices and a difference-in-differences methodology, we investigate how changes in VAT rates are passed through to consumers in islands with different market structure. We show that pass-through increases with competition, going from 50% in monopoly to around 80% in more competitive markets, but remains incomplete. We also discover a rapid rate of adjustment for VAT changes, as well as a positive relationship between competition and the rate of price adjustment. Finally, we document higher pass-through for products with more inelastic demand.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | https://cep.lse.ac.uk/_new/publications/discussion... |
| Additional Information: | © 2023 The Author(s) |
| Divisions: | Centre for Economic Performance |
| Subjects: | H Social Sciences > HC Economic History and Conditions H Social Sciences > HJ Public Finance H Social Sciences > HD Industries. Land use. Labor |
| JEL classification: | H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H22 - Incidence L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance |
| Date Deposited: | 24 Jan 2024 11:45 |
| Last Modified: | 24 Jan 2024 11:48 |
| URI: | http://eprints.lse.ac.uk/id/eprint/121321 |
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