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Can VAT Cuts and Anti-Profiteering Measures Dampen the Effects of Food Price Inflation?

Author

Listed:
  • Youssef Benzarti
  • Santiago Garriga
  • Darío Tortarolo

Abstract

We study a temporary VAT cut on food, its re-introduction, and anti-profiteering price caps during high inflation in Argentina. Using barcode-level data from over 3,000 supermarkets, we find: (1) in monitored chains, VAT-cut pass-through is near-complete, unlike the incomplete pass-through in less-monitored settings; (2) in unmonitored independents, pass-through is asymmetric—prices rise more after reinstatement than after the cut and stay above pre-cut levels; and (3) caps compress price increases in chains but leave capped prices persistently below pre-cut levels. A consumer surplus model shows the VAT cut was progressive, with caps reducing the asymmetry’s regressive impact.

Suggested Citation

  • Youssef Benzarti & Santiago Garriga & Darío Tortarolo, 2024. "Can VAT Cuts and Anti-Profiteering Measures Dampen the Effects of Food Price Inflation?," NBER Working Papers 32241, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32241
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    Cited by:

    1. Juan Luis Jiménez & Jordi Perdiguero & José Manuel Cazorla-Artiles, 2025. "The pass-through of subsidizing petrol consumption: the case of Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 16(1), pages 107-135, March.
    2. Bernardino, Tiago & Gabriel, Ricardo Duque & Quelhas, João & Silva-Pereira, Márcia, 2025. "The full, persistent, and symmetric pass-through of a temporary VAT cut," Journal of Public Economics, Elsevier, vol. 248(C).
    3. Roche, Maxime, 2025. "Can differentiated value-added tax rates promote healthier diets? The case of Costa Rica," Food Policy, Elsevier, vol. 131(C).
    4. Georgios Palaiodimos & Dimitris Papageorgiou, 2025. "VAT rate shocks and inflation: a theoretical and empirical analysis for Greece," Economic Bulletin, Bank of Greece, issue 61, pages 7-32, July.

    More about this item

    JEL classification:

    • H0 - Public Economics - - General

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