Demand and Distance: Evidence on Cross-Border Shopping
2007 (English)In: Journal of Public Economics, ISSN 0047-2727, E-ISSN 1879-2316, Vol. 91, no 1-2, 141-157 p.Article in journal (Refereed) Published
An important issue for commodity taxation is the extent to which changes in foreign taxes affect the extent of cross-border shopping and thereby, domestic tax revenue. We use data from Swedish municipalities to estimate how responsive alcohol sales are to foreign prices, and relate the sensitivity to the location's distance to the border. Typical results suggest that the elasticity with respect to the foreign price is around 0.3 in the border region; moving 150 (400) km inland reduces the cross-price elasticity to 0.2 (0.1). Our estimates suggest that a recent Danish cut in the spirits tax reduced Swedish tax revenues from spirits sales by more than 2%, and that an attempt by Sweden to cut taxes in response would reduce tax revenues further.
Place, publisher, year, edition, pages
2007. Vol. 91, no 1-2, 141-157 p.
Cross-border shopping, European integration, Law of one price, Tax competition, Tax harmonization
IdentifiersURN: urn:nbn:se:kth:diva-10860DOI: 10.1016/j.jpubeco.2006.05.006ISI: 000244161300007ScopusID: 2-s2.0-33845216643OAI: oai:DiVA.org:kth-10860DiVA: diva2:228293
QC 201009072009-07-282009-07-282010-09-07Bibliographically approved