The heterogeneous tax pass-through under different vertical relationships Raúl Bajo-Buenestado and Miguel Ángel Borrella-Mas
By: Bajo-Buenestado, Raúl
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Contributor(s): Borrella Mas, Ángel.
Material type: 
ArticleSubject(s): ECONOMIA DE MERCADO | CONSUMIDORES | IMPUESTO SOBRE EL CONSUMO | GASOLINA | COMPAÑIAS PETROLIFERAS | PRECIOS | ESPAÑAOnline resources: Click here to access online
In:
The Economic Journal v. 132, n. 645, July 2022, p. 1684-1708Summary: A large body of literature has examined the impact of the horizontal market structure on the tax incidence on consumers. However, the extent to which the vertical market structure affects the tax pass-through—which might be particularly relevant in the presence of the double marginalisation problem—is an unexplored question. Using a confidential dataset of gas station contracts with a major Spanish refiner, in combination with their retail fuel prices and characteristics, we document that the pass-through of a tax on prices is about 38% higher in vertically integrated gas stations than in independent ones. Our estimates allow us to assess the impact on government revenue and emissions under different counterfactual market scenarios.
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| OP 282/2022/644-3 Erosion of State power, corruption control and fiscal capacity | OP 282/2022/644-4 Welfare effects of housing transaction taxes | OP 282/2022/645 The Economic Journal | OP 282/2022/645-1 The heterogeneous tax pass-through under different vertical relationships | OP 282/2022/645-2 Housing expenditure and income inequality | OP 282/2022/646 The Economic Journal | OP 282/2022/647 The Economic Journal |
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A large body of literature has examined the impact of the horizontal market structure on the tax incidence on consumers. However, the extent to which the vertical market structure affects the tax pass-through—which might be particularly relevant in the presence of the double marginalisation problem—is an unexplored question. Using a confidential dataset of gas station contracts with a major Spanish refiner, in combination with their retail fuel prices and characteristics, we document that the pass-through of a tax on prices is about 38% higher in vertically integrated gas stations than in independent ones. Our estimates allow us to assess the impact on government revenue and emissions under different counterfactual market scenarios.
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