Do Taxes Produce Better Wine?
Research output: Working paper
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Do Taxes Produce Better Wine? / Ljunge, Jan Martin.
Department of Economics, University of Copenhagen, 2011.Research output: Working paper
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TY - UNPB
T1 - Do Taxes Produce Better Wine?
AU - Ljunge, Jan Martin
N1 - JEL classification: D12, H31
PY - 2011
Y1 - 2011
N2 - Theory predicts that unit taxes increase the quality consumed in a market since unit taxes reduce the relative price of high quality goods. Ad valorem taxes, on the other hand, have no effect on relative prices and should not affect product quality. The hypothesis is tested empirically in the US wine market. I find that the market share of high quality wine is significantly increased by unit taxes and that there is no significant effect of ad valorem taxes, in accordance with the hypothesis and previous empirical studies.
AB - Theory predicts that unit taxes increase the quality consumed in a market since unit taxes reduce the relative price of high quality goods. Ad valorem taxes, on the other hand, have no effect on relative prices and should not affect product quality. The hypothesis is tested empirically in the US wine market. I find that the market share of high quality wine is significantly increased by unit taxes and that there is no significant effect of ad valorem taxes, in accordance with the hypothesis and previous empirical studies.
KW - Faculty of Social Sciences
KW - Quality Choice
KW - Tax Distortion
KW - unit taxes
M3 - Working paper
BT - Do Taxes Produce Better Wine?
PB - Department of Economics, University of Copenhagen
ER -
ID: 35372869