Shifting on prices of per unit and ad valorem consumption taxes, estimation on prices of alcoholic beverages in France

Economic theory states that on market with imperfect competition, per unit consumption taxes should induce a larger increase of prices than ad valorem consumption taxes. It implies that consumers bear a larger share of the tax burden for per unit consumption taxes than for ad valorem consumption taxes. The present paper aims at testing empirically this theoretical result. It uses the French market for alcoholic beverages, which is submitted to both per unit (excise taxes) and ad valorem (VAT) consumption taxes. Econometrics is implemented on two reforms of consumption taxes aecting two French market for alcoholic beverages, beers and aperitifs. In 1995, the full rate of VAT increased from 18,6% to 20,6%; excise taxes on alcoholic beverages increased heterogeneously in 1997. Graphical evidence and econometrical results conrm the statements of economic theory. For both classes of alcoholic beverages - beers and aperitifs - the shifting on prices of per unit excise taxes was signicantly larger than the shifting of ad valorem VAT.tax incidence, VAT, excise taxes, alcoholic beverages, imperfect competition

Is Tax Shifting Asymmetric? Evidence from French VAT reforms, 1995-2000

This paper presents evidence from three French VAT reforms showing that tax shifting on prices operates differently upwards and downwards. This may appear as a paradox when reading usual studies on price shifting. This paper puts forward two different asymmetric effects. The first one is linked to asymmetries in firms' supply curves, which imply that price decreases are smaller than price increases. It occurs because firms decrease their production more easily than they increase it. The second asymmetric effect is linked to asymmetries in customers' demand curves, which react with higher intensity to big price changes than to tenuous ones. Therefore, in markets with monopolistic firms or with collusion - markets that better consider the variations of the demand because of the price making power of firms - price increases are relatively weak in order to prevent the fall of the demand, and price decreases are relatively strong in order to take profit of the takeoff of the demand. This paper shows that this second effect can counteract the first effect in markets with high fixed costs.commodity taxation ; tax incidence ; economic agents behaviour ; oligopoly

Spouse labor supply: fiscal incentive and income effect,evidence from French fully joint income tax system

The aim of the present paper is to measure the labor market participation elasticity with respect to income tax rates. A very complete data base of more than 500 000 observations a year is used. This data base is a large sample of the French income tax returns. The case of spouses is studied by comparing - for very similar couples - the probability of the secondary earner to participate in the labor market depending on the other foyer incomes on the one hand and depending on the tax rate which would apply on the income of this potential work on the other hand. Results find labor market participation elasticity with respect to income tax rate equal to -0.04 and with respect to income equal to -0.30. That for, it is outlined that joint income tax schedules have a negative impact on the secondary earners participation to labor market. As secondary earners are mainly women in France, joint income tax schedules have a negative impact on women participation to the labor market. Furthermore, different elasticities are measured for different population categories. Two phenomenons appear, they confirm each other partially. On the one hand, there is a difference between secondary earners more or less constrained to participate in the labor market. The more constrained ones have weaker elasticities than the less constrained ones. On the other hand, there is a major difference between the capital holders and the others. The capital holders’ elasticity with respect to income tax rate is higher than their elasticity with respect to income. The opposite occurred for the other households.Labor supply; Time allocation; Fiscal incidence.

The optimal decentralization of public input provision for private producation

This article presents a model of optimal decentralization of economic governance. It focuses on the provision of public input for private production. It considers that the decision power is given to a local government if it has the full right to decide new investments and new taxes to finance it. Three economic forces act on this optimal decentralization of the decision. First is the centripetal force which consists in the increasing accuracy and relevance of public investments when decided more locally. The second and third are the centrifugal forces of the administrative costs on the one hand and of the fiscal competition among decentralized jurisdictions on the other. Formal proofs of the existence and uniqueness of solutions are given under special hypotheses and in general. Numerical analysis is also done to understand the impact on the optimal decentralization level of the different model parameters.Decentralization, Corporate taxes, Tax competition, Public input, Firm location

Who pays commodity taxes? Evidence from French reforms, 1987-1999

The point of this paper is to measure empirically the distribution of the commodity tax burden between consumers and producers. For that purpose, two French reforms are studied. These reforms are steep decreases of the VAT rate on housing repair services on the one hand, and on new car sales on the other hand, the last sector being far more concentrated. The consumer share of the commodity tax burden is 77% in the housing repair services market and 52% in the new car sales market. That confirms the theoretical result of the consumer share increasing with the competition level. This result may influence recommendations about differentiated commodity tax rates.commodity taxation ; tax burden ; tax incidence ; oligopoly

Fiscal competition between decentralized jurisdictions, theoretical and empirical evidence

This article provides theoretical and empirical evidence that local fiscal competition generates a bias toward low business tax rates. Furthermore, it is shown that this bias is stronger for smaller jurisdictions. First, a theoretical model is settled with private and public capital and a fixed factor. The fixed factor allows to consider differences between the jurisdictions. The results show that there exists a bias toward low tax rates due to tax competition. This bias generates an underprovision of public capital, and therefore production is smaller with tax competition than with cooperation. Moreover, the bias toward low tax rates is stronger for jurisdictions with less fixed factor. That means that tax competition generates a larger production decrease for smaller jurisdictions. The empirical part aims at estimating the bias toward low tax rates and its dependency with respect to the fixed factor. Panel regressions with temporal and individual fixed effects of the tax rates are implemented with French local data, using the creation of intercity communities. The results indicate that the bias toward low local tax rates is strong: up to 23% decrease for the smaller cities. It is also significantly decreasing with respect to the city size: there is no tax rate decrease due to tax competition for the biggest cities.Optimal taxation; Business taxes ; Tax competition ; Public capital; Firm location.

Is Tax Shifting Asymmetric? Evidence from French VAT reforms, 1995-2000

This paper presents evidence from three French VAT reforms showing that tax shifting on prices operates differently upwards and downwards. This may appear as a paradox when reading usual studies on price shifting. This paper puts forward two different asymmetric effects. The first one is linked to asymmetries in firms' supply curves, which imply that price decreases are smaller than price increases. It occurs because firms decrease their production more easily than they increase it. The second asymmetric effect is linked to asymmetries in customers' demand curves, which react with higher intensity to big price changes than to tenuous ones. Therefore, in markets with monopolistic firms or with collusion - markets that better consider the variations of the demand because of the price making power of firms - price increases are relatively weak in order to prevent the fall of the demand, and price decreases are relatively strong in order to take profit of the takeoff of the demand. This paper shows that this second effect can counteract the first effect in markets with high fixed costs.Cette étude analyse trois réformes fiscales françaises pour montrer les différences d'ajustement des prix à des augmentations ou des diminutions de TVA. Deux effets sont proposés. Le premier est dû à des asymétries dans les fonctions d'offre des producteurs, ce qui entraîne des hausses de prix plus importantes que les baisses de prix. Le second est dû à des asymétries dans les fonctions de demande des consommateurs, ce qui entraîne des hausses de prix moins importantes que les baisses de prix. Il est alors montré que le second effet, plus paradoxal que le premier, existe et peu compenser le premier effet en présence d'importants coûts fixes

Who pays commodity taxes? Evidence from French reforms, 1987-1999

The point of this paper is to measure empirically the distribution of the commodity tax burden between consumers and producers. For that purpose, two French reforms are studied. These reforms are steep decreases of the VAT rate on housing repair services on the one hand, and on new car sales on the other hand, the last sector being far more concentrated. The consumer share of the commodity tax burden is 77% in the housing repair services market and 52% in the new car sales market. That confirms the theoretical result of the consumer share increasing with the competition level. This result may influence recommendations about differentiated commodity tax rates.L'objectif de cette étude est de mesurer empiriquement le partage de la charge des taxes indirectes sur la consommation entre les consommateurs et les producteurs. Dans ce but, deux réformes françaises sont étudiées. Ces réformes consistent en d'importantes baisses des taux de TVA appliqués aux ventes de voitures neuves d'une part, et aux services de réparation dans les logements d'autre part. Le premier secteur est bien plus concentré que le second. La part du consommateur dans le paiement de la TVA est ainsi mesurée égale à 77% pour les services de réparation dans les logements et égale à 52% pour les ventes de voitures neuves. Cela confirme le résultat théorique prévoyant une part des consommateurs dans le paiement de la TVA croissante avec le degré de compétition. Ces résultats peuvent avoir des répercussions sur les recommandations en termes de taux de taxes indirectes différentiés

The Arab Spring and its different outcomes: Explaining the variation in the state of democratisation

The theme of this study is the Arab Spring and democratisation. The Arab Spring affected every country in the region very differently. This study aims to explain the variation of the state of democratisation in the different countries, as well as identify the factor(s) behind this variation. Six countries are selected for the analysis; half of them experienced major changes, the other half just minor political changes. These are tested against the modernisation theory, while controlling for Huntington's theory about waves of democratisation. The chosen method is a comparative politics method, together with quantitative analysis. The result shows that, contrary to the modernisation theory and the hypothesis, economic and socioeconomic development does not explain the variation in the state of democratisation. Countries with minor political changes are, to some extent, also more developed. The result further suggests that other factors such as economic failure and monarchy’s resilience could possibly explain the variation in the state of democratisation

Differing Price Adjustments to Rises and Falls in VAT Rates: An Empirical Analysis Based on the 1995 and 2000 French Reforms

Price adjustments in response to varying levels of indirect taxation depend on the nature of market competition, but also on whether the tax in question rises or falls. A first asymmetric effect is linked to production adjustment costs or credit constraints, which result in asymmetrical supply flexibility, giving rise in turn to asymmetrical price adjustments because it is more expensive to increase than to cut production. The second effect is linked to consumer demand: consumers react in a more pronounced way to higher price variations both because they are more obvious and because of the costs involved in changing their consumer habits. However, these two theoretical effects, tested and validated using French data from the analysis of the 1995 and 2000 reforms of the top VAT rate, are short-term effects: the adjustment costs are temporary and the promotional effects evaporate over time.Sales Tax, Tax Incidence, Agent Behavior, Oligopoly