Skip to main content
Article thumbnail
Location of Repository

Do Taxes Produce Better Wine?

By Martin Ljunge


Theory predicts that unit taxes increase the quality in a market since unit taxes reduce the relative price of high quality goods. Ad valorem taxes, on the other hand, have no effect on relative prices and should not affect product quality. The hypothesis is tested empirically in the US wine market. I find that the market share of high quality wine is significantly increased by unit taxes and that there is no significant effect of ad valorem taxes, in accordance with the hypothesis and a previous empirical study. However, this test is indirect and does not identify the theoretical prediction. The paper develops and performs direct tests of the hypothesis. The direct tests find no evidence of quality shifting

Topics: JEL codes, D12, H31 Keywords, Quality Choice, Unit Tax, Tax Distortion
Year: 2004
OAI identifier: oai:CiteSeerX.psu:
Provided by: CiteSeerX
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • (external link)
  • (external link)
  • Suggested articles

    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.