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

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Author Info

  • Mark Skidmore

    ()
    (Department of Economics, University of Wisconsin - Whitewater)

  • Mehmet Serkan Tosun

    ()
    (Bureau of Business and Economic Research, College of Business and Economics, West Virginia University)

Abstract

In this paper we present new evidence of cross-border shopping in response to sales taxation. While several instructive studies provide estimates of the cross-border shopping effect, we utilize a unique opportunity 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 we estimate 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. Our 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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Bibliographic Info

Paper provided by UW-Whitewater, Department of Economics in its series Working Papers with number 05-07.

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Length: 29 pages
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:uww:wpaper:05-07

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Postal: Whitewater, WI 53190-1750
Phone: (414) 472-1361
Web page: http://www.uww.edu/cobe/economics/main.html
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References

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  1. Austan Goolsbee, 1998. "In a World Without Borders: The Impact of Taxes on Internet Commerce," NBER Working Papers 6863, National Bureau of Economic Research, Inc.
  2. Garrett, Thomas A. & Marsh, Thomas L., 2002. "The revenue impacts of cross-border lottery shopping in the presence of spatial autocorrelation," Regional Science and Urban Economics, Elsevier, vol. 32(4), pages 501-519, July.
  3. Mark Skidmore & Mehmet Serkan Tosun, 2005. "Do New Lottery Games Stimulate Retail Activity? Evidence from West Virginia Counties," Working Papers 05-06, UW-Whitewater, Department of Economics.
  4. PERALTA, Susana & van YPERSELE, Tanguy, 2002. "Coordination of capital taxation among Asymmetric countries," CORE Discussion Papers 2002032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. 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.
  6. 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.
  7. Ohsawa, Yoshiaki, 2003. "A spatial tax harmonization model," European Economic Review, Elsevier, vol. 47(3), pages 443-459, June.
  8. Case, Anne C, 1991. "Spatial Patterns in Household Demand," Econometrica, Econometric Society, vol. 59(4), pages 953-65, July.
  9. 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.
  10. Neumann, Rebecca & Holman, Jill & Alm, James, 2009. "Globalization and tax policy," The North American Journal of Economics and Finance, Elsevier, vol. 20(2), pages 193-211, August.
  11. Case, Anne, 1992. "Neighborhood influence and technological change," Regional Science and Urban Economics, Elsevier, vol. 22(3), pages 491-508, September.
  12. Gordon, Roger H. & Bo Nielsen, Soren, 1997. "Tax evasion in an open economy:: Value-added vs. income taxation," Journal of Public Economics, Elsevier, vol. 66(2), pages 173-197, November.
  13. Ferris, J. Stephen, 2000. "The Determinants of Cross Border Shopping: Implications for Tax Revenues and Institutional Change," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 801-24, December.
  14. Tosun, Mehmet Serkan & Skidmore, Mark, 2004. "Interstate Competition and State Lottery Revenues," National Tax Journal, National Tax Association, vol. 57(2), pages 163-78, June.
  15. Ronald C. Fisher, 1980. "Local Sales Taxes: Tax Rate Differentials, Sales Loss, and Revenue Estimation," Public Finance Review, , vol. 8(2), pages 171-188, April.
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Cited by:
  1. Svante Karlsson & Urban Lindgren, 2011. "From Manufacturing to Retail? – Cross-Border Shopping and Economic Restructuring in West Sweden," ERSA conference papers ersa10p992, European Regional Science Association.

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