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Tax Liability-Side Equivalence in Experimental Posted-Offer Markets

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  • Rainald Borck

    (Humboldt-Universität zu Berlin)

  • Dirk Engelmann

    (Humboldt-Universität zu Berlin)

  • Wieland Müller

    (Humboldt-Universität zu Berlin)

  • Hans-Theo Normann

    ()
    (Department of Economics, Royal Holloway, University of London)

Abstract

In theory, the incidence of a tax should be independent of the side of the market on which it is levied. This principle of liability-side equivalence underlies virtually all theories of tax incidence. Policy discussions, however, tend to place great emphasis on the legal division of tax payments. We use computerized experimental posted-offer markets to test liability-side equivalence. We find that market outcomes are essentially the same when the tax is levied on sellers as when it is levied on buyers. Thus, we cannot reject liability-side equivalence.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 68 (2002)
Issue (Month): 3 (January)
Pages: 672-682

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Handle: RePEc:sej:ancoec:v:68:3:y:2002:p:672-682

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  1. W. Guth & R. Schmittberger & B. Schwartz, 2010. "An experimental analysis of ultimatum bargaining," Levine's Working Paper Archive 291, David K. Levine.
  2. Quirmbach, Herman & Swenson, Charles & Vines, Cynthia, 1996. "An Experimental Examination of General Equilibrium Tax Incidence," Staff General Research Papers, Iowa State University, Department of Economics 5204, Iowa State University, Department of Economics.
  3. Luigi Bosco & Luigi Mittone, 1994. "Tax evasion and moral constraints: some experimental evidence," Department of Economics Working Papers, Department of Economics, University of Trento, Italia 9402, Department of Economics, University of Trento, Italia.
  4. Plott, Charles R., . "Industrial Organization Theory and Experimental Economics," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 405, California Institute of Technology, Division of the Humanities and Social Sciences.
  5. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 3(4), pages 367-388, December.
  6. Quirmbach, Herman C. & Swenson, Charles W. & Vines, Cynthia C., 1996. "An experimental examination of general equilibrium tax incidence," Journal of Public Economics, Elsevier, Elsevier, vol. 61(3), pages 337-358, September.
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