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The Impact of Value Added Tax on Household Expenditure in Colombia

Author

Listed:
  • Christian Jaramillo

    () (Facultad de Economía – CEDE, Universidad de los Andes)

  • Jorge Tovar

    () (Facultad de Economía – CEDE, Universidad de los Andes)

Abstract

this paper quantifies the impact of VAT on household expenditures by taking advantage of the relative variation of VAT in Colombia; this variation is usually used as identification strategy. To this end, we use data drawn from the Encuesta Continua de Hogares (Continuous Household Survey) and we correlate the VAT and household expenditures. In doing so, we estimate the impact of VAT on food, entertainment and telecommunication (cellular phone) expenditures. Our results suggest that an increment of VAT has positive effects on food and telecommunication expenditures and negative effects on entertainment and cultural goods. Additionally, our estimations show that an increasing VAT has differentiated effects depending on household demographic characteristics.

Suggested Citation

  • Christian Jaramillo & Jorge Tovar, 2008. "The Impact of Value Added Tax on Household Expenditure in Colombia," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 68, pages 67-93, Enero-Jun.
  • Handle: RePEc:lde:journl:y:2008:i:68:p:67-93
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    More about this item

    Keywords

    Value Added Tax; fiscal incidence; household expenditure; household surveys;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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