Advanced Search
MyIDEAS: Login to save this article or follow this journal

(Uncontrolled) Aggregate Shocks Or Vertical Tax Interdependence? Evidence From Gasoline And Cigarettes

Contents:

Author Info

  • Esteller-Moré, Alejandro
  • Rizzo, Leonzio

Abstract

Besley and Rosen (1998) were the first researchers to test empirically for the presence of vertical tax externalities, examining the case of unit taxes on gasoline and tobacco. However, they did not take into account the price differences across states that arise because high cost areas pay less in real terms than low cost areas, since federal unit sales taxes on cigarettes and gasoline do not differ across states. Consequently, we propose that vertical tax competition can be estimated by using a federal tax variable that is expressed in real terms and thus shows crosssectional variation across states. To estimate real prices we deflate all financial variables using the House Price Index (HPI), which is disaggregated by states. This empirical strategy enables us to disentangle the vertical interdependence between state and federal tax rates from aggregate shocks over time. We use U.S. data from 1975–2006 on gasoline and tobacco taxes, and find significant horizontal tax competition, but no vertical tax reactions. The results are robust to the period analyzed.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ntanet.org/NTJ/64/2/ntj-v64n02p353-79-uncontrolled-aggregate-shocks-vertical.pdf
Download Restriction: no

File URL: http://www.ntanet.org/NTJ/64/2/ntj-v64n02p353-79-uncontrolled-aggregate-shocks-vertical.html
Download Restriction: no

Bibliographic Info

Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 64 (2011)
Issue (Month): 2 (June)
Pages: 353-79

as in new window
Handle: RePEc:ntj:journl:v:64:y:2011:i:2:p:353-79

Contact details of provider:
Postal: 725 15th St. NW #600. Washington, D.C. 20005-2109
Phone: (202)737-3325
Fax: (202) 737-7308
Email:
Web page: http://www.ntanet.org/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Craig Brett & Joris Pinkse, 1997. "Those Taxes are all over the Map! A Test for Spatial Independence of Municipal Tax Rates in British Columbia," International Regional Science Review, , , vol. 20(1-2), pages 131-151, April.
  2. Edward L. Glaeser, 1996. "Should Transfer Payments Be Indexed to Local Price Levels?," NBER Working Papers 5598, National Bureau of Economic Research, Inc.
  3. Kimberley Scharf, 1999. "Scale Economies in Cross-Border Shopping and Commodity Taxation," International Tax and Public Finance, Springer, Springer, vol. 6(1), pages 89-99, February.
  4. Rosen, Harvey S., 1979. "Housing decisions and the U.S. income tax : An econometric analysis," Journal of Public Economics, Elsevier, Elsevier, vol. 11(1), pages 1-23, February.
  5. Timothy J. Besley & Harvey S. Rosen, 1999. "Vertical Externalities in Tax Setting: Evidence from Gasoline and Cigarettes," NBER Working Papers 6517, National Bureau of Economic Research, Inc.
  6. Leonzio Rizzo, 2008. "Local government responsiveness to federal transfers: theory and evidence," International Tax and Public Finance, Springer, Springer, vol. 15(3), pages 316-337, June.
  7. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 53-78, July.
  8. Devereux, M.P. & Lockwood, B. & Redoano, M., 2007. "Horizontal and vertical indirect tax competition: Theory and some evidence from the USA," Journal of Public Economics, Elsevier, Elsevier, vol. 91(3-4), pages 451-479, April.
  9. Ben Lockwood & Giuseppe Migali, 2009. "Did The Single Market Cause Competition in Excise Taxes? Evidence From EU Countries," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 119(536), pages 406-429, 03.
  10. Chakravorty, Ujjayant & Nauges, Celine & Thomas, Alban, 2008. "Clean Air regulation and heterogeneity in US gasoline prices," Journal of Environmental Economics and Management, Elsevier, vol. 55(1), pages 106-122, January.
  11. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(6), pages 1257-78, December.
  12. Davis, Morris A. & Palumbo, Michael G., 2008. "The price of residential land in large US cities," Journal of Urban Economics, Elsevier, vol. 63(1), pages 352-384, January.
  13. Ang-Olson, Jeffrey & Wachs, Martin & Taylor, Brian D., 1999. "Variable-Rate State Gasoline Taxes," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings, Institute of Transportation Studies, UC Berkeley qt1kf5d54p, Institute of Transportation Studies, UC Berkeley.
  14. Glaeser, Edward & Saiz, Albert & Gyourko, Joseph, 2008. "Housing Supply and Housing Bubbles," Scholarly Articles 2962640, Harvard University Department of Economics.
  15. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2013. "Superstar Cities," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 5(4), pages 167-99, November.
  16. Roback, Jennifer, 1988. "Wages, Rents, and Amenities: Differences among Workers and Regions," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 26(1), pages 23-41, January.
  17. Louis Kaplow, 1995. "Regional Cost-of-Living Adjustments in Tax-Transfer Schemes," NBER Working Papers 5008, National Bureau of Economic Research, Inc.
  18. David Y. Albouy, 2008. "The Unequal Geographic Burden of Federal Taxation," NBER Working Papers 13995, National Bureau of Economic Research, Inc.
  19. Michael Keen, 1997. "Vertical Tax Externalities in the Theory of Fiscal Federalism," IMF Working Papers, International Monetary Fund 97/173, International Monetary Fund.
  20. Fredriksson, Per G. & Mamun, Khawaja A., 2008. "Vertical externalities in cigarette taxation: Do tax revenues go up in smoke?," Journal of Urban Economics, Elsevier, vol. 64(1), pages 35-48, July.
  21. Avinash Dixit, 1996. "Special-Interest Lobbying and Endogenous Commodity Taxation," Eastern Economic Journal, Eastern Economic Association, Eastern Economic Association, vol. 22(4), pages 375-388, Fall.
  22. Jesse M. Shapiro, 2006. "Smart Cities: Quality of Life, Productivity, and the Growth Effects of Human Capital," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 324-335, May.
  23. Rork, Jonathan C., 2003. "Coveting Thy Neighbors' Taxation," National Tax Journal, National Tax Association, National Tax Association, vol. 56(4), pages 775-87, December.
  24. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, Econometric Society, vol. 49(6), pages 1417-26, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Esteller-Moré, Alejandro & Galmarini, Umberto & Rizzo, Leonzio, 2012. "Vertical tax competition and consumption externalities in a federation with lobbying," Journal of Public Economics, Elsevier, Elsevier, vol. 96(3), pages 295-305.
  2. Leonzio Rizzo & Alejandro Esteller - Moré, 2011. "US Excise Tax Horizontal Interdependence: Yardstick vs. Tax Competition," Working Papers 201116, University of Ferrara, Department of Economics.
  3. Alejandro Esteller-Moré & Leonzio Rizzo, 2010. "Politics or mobility? Evidence from us excise taxation," Working Papers, Institut d'Economia de Barcelona (IEB) 2010/3, Institut d'Economia de Barcelona (IEB).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ntj:journl:v:64:y:2011:i:2:p:353-79. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Charmaine Wright).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.