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Excise Taxation and Product Quality: The Gasoline Market

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  • T Nesbit

Abstract

Following Barzel (1976), product quality increases in response to unit taxation but remains unchanged by ad valorem taxation.? While many tax theorists agree this argument is theoretically sound, empirical support of Barzel's theory is limited to the cigarette market.? This paper tests and confirms his theory in the gasoline market, a market in which Barzel failed to find supporting evidence in his original article.? Using a direct test and improved data, the estimates suggest that the market share of premium-grade gasoline increases in response to both unit taxation and ad valorem taxation.

Suggested Citation

  • T Nesbit, 2007. "Excise Taxation and Product Quality: The Gasoline Market," Economic Issues Journal Articles, Economic Issues, vol. 12(2), pages 1-14, September.
    • Handle: RePEc:eis:articl:207nesbit
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    1. Sumner, Michael T & Ward, Robert, 1981. "Tax Changes and Cigarette Prices [An Alternative Approach to the Analysis of Taxation]," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1261-1265, December.
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    Cited by:

    1. Minagawa, Junichi, 2012. "On Giffen-like goods," Economics Letters, Elsevier, vol. 115(2), pages 282-285.
    2. Charlotte Emlinger & Viola Lamani, 2020. "International trade, quality sorting and trade costs: the case of Cognac," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(3), pages 579-609, August.
    3. Calcott, Paul, 2019. "Minimum unit prices for alcohol," Journal of Health Economics, Elsevier, vol. 66(C), pages 18-26.
    4. Blum, Bianca, 2018. "Ausgestaltung einer Steuerpolitik zur Förderung von LED-Beleuchtung," The Constitutional Economics Network Working Papers 01-2018, University of Freiburg, Department of Economic Policy and Constitutional Economic Theory.
    5. Daniel Flores Curiel, 2016. "Subsidizing or taxing education? A note on the quality gap and government finances," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 31(2), pages 339-353.
    6. Liu, Liqun, 2011. "The Alchian-Allen theorem and the law of relative demand: The case of multiple quality-differentiable brands," Mathematical Social Sciences, Elsevier, vol. 61(1), pages 52-57, January.
    7. Junichi Minagawa & Thorsten Upmann, 2012. "The Generalized Alchian-Allen Theorem," CESifo Working Paper Series 3969, CESifo.
    8. Markus Dertwinkel-Kalt & Katrin Köhler & Mirjam R. J. Lange & Tobias Wenzel, 2017. "Demand Shifts Due to Salience Effects: Experimental Evidence," Journal of the European Economic Association, European Economic Association, vol. 15(3), pages 626-653.
    9. Minagawa, Junichi & Upmann, Thorsten, 2013. "A note on parental time allocation," Labour Economics, Elsevier, vol. 25(C), pages 153-157.
    10. Blum, Bianca, 2020. "Fleischbesteuerung in Deutschland - Mengen- oder Mehrwertsteuer? Diskussion und Politische Implikationen," The Constitutional Economics Network Working Papers 01-2020, University of Freiburg, Department of Economic Policy and Constitutional Economic Theory.
    11. Minagawa, Junichi & Upmann, Thorsten, 2013. "A conditional demand approach to the Alchian–Allen effect," Economics Letters, Elsevier, vol. 120(3), pages 546-551.

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