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The Impact of Earmarked Taxes on Supply Curve Shifts: A Laboratory Experiment

Author

Listed:
  • Shigeharu Okajima
  • Taro Shinoda
  • Yukihiko Funaki
  • Hiroko Okajima

Abstract

In this study, we examine how ordinary taxes and earmarked taxes influence tax pass-through in a market experiment. We hypothesize that tax pass-through is lower for earmarked taxes than for ordinary taxes and that this difference depends on market conditions, specifically the balance between the trade surpluses for sellers and buyers. Our findings confirm that ordinary taxes result in full tax pass-through, whereas earmarked taxes result in less pass-through. Under earmarked taxes, sellers adjust the level of pass-through based on their trade surplus relative to the buyers’ trade surplus. These results underscore the need to distinguish between tax types. The results of our study provide novel insights into the resource allocation effects of different tax types, offering significant implications for policymakers seeking to regulate goods with externalities through taxation.

Suggested Citation

  • Shigeharu Okajima & Taro Shinoda & Yukihiko Funaki & Hiroko Okajima, 2026. "The Impact of Earmarked Taxes on Supply Curve Shifts: A Laboratory Experiment," Public Finance Review, , vol. 54(4), pages 616-650, July.
    • Handle: RePEc:sae:pubfin:v:54:y:2026:i:4:p:616-650
    DOI: 10.1177/10911421261417451
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    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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