Data and Code for: Shopping for Lower Sales Tax Rates
Principal Investigator(s): View help for Principal Investigator(s) Scott Baker, Northwestern University; Stephanie Johnson, Rice University; Lorenz Kueng, Università della Svizzera Italiana (USI)
Version: View help for Version V1
| Name | File Type | Size | Last Modified |
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| Code | 05/20/2020 09:52:AM | ||
| Data | 04/21/2020 05:06:AM | ||
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application/pdf | 335.1 KB | 05/20/2020 05:59:AM |
Project Citation:
Baker, Scott, Johnson, Stephanie, and Kueng, Lorenz. Data and Code for: Shopping for Lower Sales Tax Rates. Nashville, TN: American Economic Association [publisher], 2021. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2021-06-18. https://doi.org/10.3886/E119022V1
Project Description
Summary:
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Using comprehensive high-frequency state and local sales tax data, we show that shopping behavior responds strongly to changes in sales tax rates. Even though sales taxes are not observed in posted prices and have a wide range of rates and exemptions, consumers adjust in many dimensions. They stock up on storable goods before taxes rise and increase online and cross-border shopping in both the short and long run. The difference between short- and long-run spending responses has important implications for the efficacy of using sales taxes for counter-cyclical policy and for the design of an optimal tax framework. Interestingly, households adjust spending similarly for both taxable and tax-exempt goods. We embed an inventory problem into a continuous-time consumption-savings model and demonstrate that this behavior is optimal in the presence of shopping trip fixed costs. The model successfully matches estimated short-run and long-run tax elasticities. We provide additional evidence in favor of this new shopping-complementarity mechanism.
Funding Sources:
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Financial Institutions and Markets Research Center at the Kellogg School of Management;
NBER Household Finance small grant program
Scope of Project
Subject Terms:
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shopping complementarity;
consumer spending;
intertemporal substitution;
tax salience
JEL Classification:
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D12 Consumer Economics: Empirical Analysis
D14 Household Saving; Personal Finance
D15 Intertemporal Household Choice; Life Cycle Models and Saving
D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
E21 Macroeconomics: Consumption; Saving; Wealth
H21 Taxation and Subsidies: Efficiency; Optimal Taxation
H26 Tax Evasion and Avoidance
H31 Fiscal Policies and Behavior of Economic Agents: Household
H71 State and Local Taxation, Subsidies, and Revenue
D12 Consumer Economics: Empirical Analysis
D14 Household Saving; Personal Finance
D15 Intertemporal Household Choice; Life Cycle Models and Saving
D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
E21 Macroeconomics: Consumption; Saving; Wealth
H21 Taxation and Subsidies: Efficiency; Optimal Taxation
H26 Tax Evasion and Avoidance
H31 Fiscal Policies and Behavior of Economic Agents: Household
H71 State and Local Taxation, Subsidies, and Revenue
Geographic Coverage:
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United States
Time Period(s):
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2004 – 2014
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