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Tax Sensitivity and Home State Preferences in Internet Purchasing

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  • Glenn Ellison
  • Sara Fisher Ellison

Abstract

Data on memory modules sales are used to explore aspects of e-retail demand. Aggregate sales are examined in state-level regressions. Discrete choice techniques are used to examine (incomplete) hourly sales data from a price comparison site. We find a strong relationship between e-retail sales to a given state and sales tax rates that apply to purchases from offline retailers, suggesting substantial online-offline substitution and the importance of tax avoidance motives. Geography matters in two ways: consumers prefer purchasing from firms in nearby states and appear to have a separate preference for buying from in-state firms. (JEL D12, H25, H71, L81)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 1 (2009)
Issue (Month): 2 (August)
Pages: 53-71

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Handle: RePEc:aea:aejpol:v:1:y:2009:i:2:p:53-71

Note: DOI: 10.1257/pol.1.2.53
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  1. Jerry A. Hausman & Bronwyn H. Hall & Zvi Griliches, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," NBER Technical Working Papers 0017, National Bureau of Economic Research, Inc.
  2. Michael R. Baye & John Morgan, 2004. "Price Dispersion in the Lab and on the Internet: Theory and Evidence," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 448-466, Autumn.
  3. Goolsbee, Austan, 2001. "Competition in the Computer Industry: Online versus Retail," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 49(4), pages 487-99, December.
  4. repec:rje:randje:v:37:y:2006:i:4:p:964-982 is not listed on IDEAS
  5. Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
  6. Lesley Chiou, 2009. "Empirical Analysis of Competition between Wal-Mart and Other Retail Channels," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 18(2), pages 285-322, 06.
  7. Chris Forman & Anindya Ghose & Avi Goldfarb, 2009. "Competition Between Local and Electronic Markets: How the Benefit of Buying Online Depends on Where You Live," Management Science, INFORMS, INFORMS, vol. 55(1), pages 47-57, January.
  8. Walsh, Michael J. & Jones, Jonathan D., 1988. "More Evidence on the "Border Tax" Effect: The Case of West Virginia, 1979-84," National Tax Journal, National Tax Association, vol. 41(2), pages 261-65, June.
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Cited by:
  1. Emin M. Dinlersoz & Rubén Hernández-Murillo, 2004. "The diffusion of electronic business in the U.S," Working Papers, Federal Reserve Bank of St. Louis 2004-009, Federal Reserve Bank of St. Louis.
  2. Allen Tran, 2014. "The Aggregate Impact Of Online Retail," Working Papers 14-23, Center for Economic Studies, U.S. Census Bureau.
  3. Liran Einav & Dan Knoepfle & Jonathan Levin & Neel Sundaresan, 2014. "Sales Taxes and Internet Commerce," American Economic Review, American Economic Association, vol. 104(1), pages 1-26, January.
  4. Hu, Yu Jeffrey & Tang, Zhulei, 2014. "The impact of sales tax on internet and catalog sales: Evidence from a natural experiment," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 32(C), pages 84-90.
  5. Lesley Chiou, 2005. "Empirical Analysis of Retail Competition: Spatial Differentiation at Wal-Mart, Amazon.com, and Their Competitors," Occidental Economics Working Papers 3, Occidental College, Department of Economics, revised Nov 2006.
  6. Brian Baugh & Itzhak Ben-David & Hoonsuk Park, 2014. "The “Amazon Tax”: Empirical Evidence from Amazon and Main Street Retailers," NBER Working Papers 20052, National Bureau of Economic Research, Inc.
  7. Gao, Maija & Hyytinen, Ari & Toivanen, Otto, 2005. "Demand for Mobile Internet: Evidence from a Real-World Pricing Experiment," Discussion Papers, The Research Institute of the Finnish Economy 964, The Research Institute of the Finnish Economy.
  8. Fox, William F. & Luna, LeAnn & Schaur, Georg, 2014. "Destination taxation and evasion: Evidence from U.S. inter-state commodity flows," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 57(1), pages 43-57.
  9. Benjamin Edelman, 2012. "Using Internet Data for Economic Research," Journal of Economic Perspectives, American Economic Association, vol. 26(2), pages 189-206, Spring.
  10. Emin M. Dinlersoz & Rubén Hernández-Murillo, 2005. "The diffusion of electronic business in the United States," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 11-34.

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