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VAT pass-through and competition: evidence from the Greek Islands

Author

Listed:
  • Lydia Dimitrakopoulou
  • Christos Genakos
  • Themistoklis Kampouris
  • Stella Papadokonstantaki

Abstract

We examine how competition affects VAT pass-through in isolated oligopolistic markets as defined by the Greek islands. Using daily gasoline prices and a difference-in-differences methodology, we investigate how changes in VAT rates are passed through to consumers in islands with different market structure. We show that pass-through increases with competition, going from 50% in monopoly to around 80% in more competitive markets, but remains incomplete. We also discover a rapid rate of adjustment for VAT changes, as well as a positive relationship between competition and the rate of price adjustment. Finally, we document higher pass-through for products with more inelastic demand.

Suggested Citation

  • Lydia Dimitrakopoulou & Christos Genakos & Themistoklis Kampouris & Stella Papadokonstantaki, 2023. "VAT pass-through and competition: evidence from the Greek Islands," CEP Discussion Papers dp1923, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1923
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    References listed on IDEAS

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    2. Kinnl, Klara & Wohak, Ulrich, 2023. "Free the Period? Evaluating Tampon Tax Reforms Using Household Scanner Data," Department of Economics Working Paper Series 356, WU Vienna University of Economics and Business.

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    Keywords

    pass-through; tax incidence; gasoline; value added tax (VAT); market structure; competition; Greek Islands;
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