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Signaling Through Taxing America’s Sin: A Panel Data Study

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Abstract

This article aims to examine how sin taxation changes long-term consumer behavior regarding commodities which are deemed harmful for both health and the environment. These include tobacco, alcoholic beverages, sugar and confectionary, household energy, and motor fuel. Specifically, we examine the signaling effect from taxation which is seen if a tax increase leads to a significantly larger change in consumption than a producer price change. The empirical analysis is conducted by a US panel data study, during the period 1988-2012 for the four US census regions, using the Almost Ideal Demand System (AIDS). We find the main result to be that the signaling effect from taxation is significant for tobacco (at the 10% significance level) as well as for electricity and motor fuel (at the 5% significance level).

Suggested Citation

  • Brockwell, Erik, 2014. "Signaling Through Taxing America’s Sin: A Panel Data Study," CERE Working Papers 2014:4, CERE - the Center for Environmental and Resource Economics.
    • Handle: RePEc:hhs:slucer:2014_004
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    File URL: http://www.cere.se/documents/wp/2014/CERE_WP2014-4.pdf
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    Cited by:

    1. Alvarado, Miriam & Penney, Tarra L. & Unwin, Nigel & Murphy, Madhuvanti M. & Adams, Jean, 2021. "Evidence of a health risk ‘signalling effect’ following the introduction of a sugar-sweetened beverage tax," Food Policy, Elsevier, vol. 102(C).
    2. Tyutyuryukov Vladimir, 2016. "What can VAT Statistics Tell Politicians? (with a Focus on EAEU Data)," NISPAcee Journal of Public Administration and Policy, Sciendo, vol. 9(2), pages 239-269, December.

    More about this item

    Keywords

    taxation; signaling; public policy; regulation; legislation; almost ideal demand system; panel data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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