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Cross-Border Shopping and the Sales Tax: A Reexamination of Food Purchases in West Virginia

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  • Mehmet Serkan Tosun

    ()
    (Department of Economics, University of Nevada)

  • Mark Skidmore

    ()
    (Agricultural, Food, and Resource Economics, Michigan State University)

Abstract

In this paper new evidence is presented of cross-border shopping in response to sales taxation. While several instructive studies provide estimates of the cross-border shopping effect, a unique opportunity is utilized to evaluate the effect of a large discrete change in sales tax policy. Using county level data on food income and sales tax data for West Virginia over the 1982-2000 period it is estimated that for every one-percentage point increase in the county relative price ratio due to sales tax change, the per capita food income decreases by about 0.7 percent. The estimates indicate that food sales fell in West Virginia border counties by about 4 percent as a result of the imposition of the 6 percent sales tax on food in 1989.

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File URL: http://rri.wvu.edu/wp-content/uploads/2012/11/Tosunwp2005-7.pdf
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Bibliographic Info

Paper provided by Regional Research Institute, West Virginia University in its series Working Papers with number 200507.

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Length: 28 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:rri:wpaper:200507

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Postal: 886 Chestnut Ridge Road, P.O. Box 6825, Morgantown, WV 26506-6825
Phone: 304 293 2896
Fax: 304 293 6699
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Web page: http://rri.wvu.edu/research/working-papers/
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Keywords: food; west virginia; sales tax; economics; regional;

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  1. Skidmore, Mark & Serkan Tosun, Mehmet, 2008. "Do New Lottery Games Stimulate Retail Activity? Evidence from West Virginia Counties," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 38(1).
  2. Ohsawa, Yoshiaki, 2003. "A spatial tax harmonization model," European Economic Review, Elsevier, vol. 47(3), pages 443-459, June.
  3. Case, Anne, 1992. "Neighborhood influence and technological change," Regional Science and Urban Economics, Elsevier, vol. 22(3), pages 491-508, September.
  4. Ohsawa, Yoshiaki, 1999. "Cross-border shopping and commodity tax competition among governments," Regional Science and Urban Economics, Elsevier, vol. 29(1), pages 33-51, January.
  5. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October.
  6. Case, Anne C, 1991. "Spatial Patterns in Household Demand," Econometrica, Econometric Society, vol. 59(4), pages 953-65, July.
  7. Michael A. Nelson, 2002. "Using Excise Taxes to Finance State Government: Do Neighboring State Taxation Policy and Cross-Border Markets Matter?," Journal of Regional Science, Wiley Blackwell, vol. 42(4), pages 731-752.
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