Nanyang Business School
Nanyang Technological University
NBER Working Papers and Publications
|April 2014||Can Taxes Shape an Industry? Evidence from the Implementation of the “Amazon Tax”|
with Brian Baugh, Itzhak Ben-David: w20052
For years, online retailers have maintained a price advantage over brick-and-mortar retailers by not collecting sales tax at the time of sale. Recently, several states have required that online retailer Amazon collect sales tax during checkout. Using transaction-level data, we document that households living in these states reduced Amazon purchases by 9.4% after sales tax laws were implemented, implying elasticities ranging from –1.2 to –1.4. The effect is more pronounced for large purchases, for which we estimate a reduction of 29.1% in purchases, corresponding to an elasticity of –3.9. Studying competitors in the electronics field, we detect some evidence of substitution toward competing retailers.
|January 2014||Disentangling Financial Constraints, Precautionary Savings, and Myopia: Household Behavior Surrounding Federal Tax Returns|
with Brian Baugh, Itzhak Ben-David: w19783
We explore household consumption surrounding federal tax returns filings and refunds receipt to test various theories of consumption. Because uncertainty regarding the refund is resolved at filing, precautionary savings theory predicts an increase in consumption at this date. Contrary to this prediction, we find that households generally do not increase consumption at filing. Following the receipt of the refunds, consumption of both durables and nondurables increases dramatically and then decays quickly. Our results show that households, on average, are financially constrained, exhibit myopic behavior, and do not respond to precautionary savings motives.