Please use this identifier to cite or link to this item:
Title: (Uncontrolled) Aggregate shocks or vertical tax interdependence? Evidence from gasoline and cigarettes [WP-IEB]
Author: Esteller Moré, Alejandro
Rizzo, Leonzio
Keywords: Impostos
Relacions fiscals intergovernamentals
Consum (Economia)
Funcions de variables complexes
Intergovernmental fiscal relations
Consumption (Economics)
Functions of complex variables
Issue Date: 2009
Publisher: Institut d’Economia de Barcelona
Series/Report no: [WP E-IEB09/24]
Abstract: Besley and Rosen (1998) were the first authors to empirically estimate the presence of vertical tax externalities. They tested it on gasoline and tobacco unitary taxes. However, they did not take into account the difference in cost of living across states: high cost areas pay less in real terms than low cost areas, since the nominal unit tax on cigarettes and gasoline does not differ according to the state in which it is applied. Consequently, we propose that vertical tax competition can be estimated by deflating all financial variables using the House Price Index (HPI), which is disaggregated by states. This produces a federal tax variable that is expressed in real terms and shows cross-sectional variation. This empirical strategy enabled us to disentangle the vertical interdependence between state and federal tax rates from aggregate shocks over time, using US data from 1975 to 2006 on gasoline and tobacco. We found significant horizontal tax competition, which was higher for cigarettes, but no vertical tax reaction. The results were robust to the period analyzed.
Note: Reproducció del document publicat a:
It is part of: IEB Working Paper 2009/24
Appears in Collections:IEB (Institut d’Economia de Barcelona) – Working Papers

Files in This Item:
File Description SizeFormat 
IEB09-24_Esteller+Rizzo.pdf657.92 kBAdobe PDFView/Open

This item is licensed under a Creative Commons License Creative Commons