Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273331 
Year of Publication: 
2023
Series/Report no.: 
DIW Discussion Papers No. 2039
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
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.
Subjects: 
Pass-through
Tax incidence
Gasoline
Value added tax (VAT)
Market structure
Competition
Greek islands
JEL: 
H22
L1
Document Type: 
Working Paper

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