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Salience and Taxation with Imperfect Competition

Kory Kroft, Jean-William P. Laliberté, René Leal Vizcaíno, Matthew J. Notowidigdo

NBER Working Paper No. 27409
Issued in June 2020
NBER Program(s):Public Economics

This paper studies commodity taxation in a general model featuring imperfect competition and tax salience. We derive new formulas for the incidence and marginal excess burden of commodity taxation, and we estimate the necessary inputs to the formulas by combining Nielsen Retail Scanner data from grocery stores in the US with detailed sales tax data. We calibrate our new formulas and conclude that the incidence of sales taxes on consumers is increasing in tax salience, and the marginal excess burden of taxation is larger than standard formulas that ignore imperfect competition and tax salience.

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Document Object Identifier (DOI): 10.3386/w27409

 
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