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Is Tax Shifting Asymmetric? Evidence from French VAT reforms, 1995-2000


  • Clément Carbonnier

    (PJSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)


This paper presents evidence from three French VAT reforms showing that tax shifting on prices operates differently upwards and downwards. This may appear as a paradox when reading usual studies on price shifting. This paper puts forward two different asymmetric effects. The first one is linked to asymmetries in firms' supply curves, which imply that price decreases are smaller than price increases. It occurs because firms decrease their production more easily than they increase it. The second asymmetric effect is linked to asymmetries in customers' demand curves, which react with higher intensity to big price changes than to tenuous ones. Therefore, in markets with monopolistic firms or with collusion - markets that better consider the variations of the demand because of the price making power of firms - price increases are relatively weak in order to prevent the fall of the demand, and price decreases are relatively strong in order to take profit of the takeoff of the demand. This paper shows that this second effect can counteract the first effect in markets with high fixed costs.

Suggested Citation

  • Clément Carbonnier, 2005. "Is Tax Shifting Asymmetric? Evidence from French VAT reforms, 1995-2000," PSE Working Papers halshs-00590719, HAL.
  • Handle: RePEc:hal:psewpa:halshs-00590719
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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Borowiecki, Karol J. & Navarrete, Trilce, 2015. "Fiscal and Economic Aspects of Book Consumption in the European Union," Discussion Papers of Business and Economics 7/2015, University of Southern Denmark, Department of Business and Economics.
    2. Clément Carbonnier, 2006. "Who pays commodity taxes? Evidence from French reforms, 1987-1999," PSE Working Papers halshs-00590515, HAL.
    3. Martin Mellens & Hendrik Vrijburg (EUR) & Jonneke Dijkstra (EUR), 2014. "Robust estimation of the VAT pass-through in the Netherlands," CPB Discussion Paper 297, CPB Netherlands Bureau for Economic Policy Analysis.
    4. repec:ijm:journl:v10:y:2017:i:1:p:39-72 is not listed on IDEAS
    5. Jouko Kinnunen & Timo Rauhanen & Juha Honkatukia, 2011. "Effects of past and new VAT reforms in Finland," EcoMod2011 3412, EcoMod.
    6. Youssef Benzarti & Dorian Carloni & Jarkko Harju & Tuomas Kosonen, 2017. "What Goes Up May Not Come Down: Asymmetric Incidence of Value-Added Taxes," NBER Working Papers 23849, National Bureau of Economic Research, Inc.


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