Tax incidence with endogenous quality and costly bargaining: Theory and evidence from hybrid vehicle subsidies

• 成果类型: Article
• 署名作者: Gulati, Sumeet; McAusland, Carol; Sallee, James M.
• 署名单位: University of British Columbia; University of California System; University of California Berkeley
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2017.09.003
• 发表日期: 2017
• 页码: 93-107
• 关键词: Incidence; bargaining; Green subsidies; Energy efficient technologies; Hybrid electric vehicles; automobiles

摘要

Endogenous quality and bargaining are important features of many markets but are typically omitted from studies of incidence. We develop a model with product upgrades and costly bargaining and find that tax rate pass-through only partially characterizes the welfare impact of taxation; consumers may respond to a tax or subsidy by changing product quality or by changing their bargaining effort. We apply the insights of our theory to the study of subsidies for green goods, specifically hybrid electric vehicles in Canada. We utilize highly detailed transaction data and leverage panel variation in subsidies across provinces for identification. Our baseline estimate finds that prices rises by $570 for every $1000 increase in the subsidy. But, this pass through estimate substantially underestimates consumer gains because a majority of this price increase ($459-approximate to 80%) is due to increased product quality in the form of additional options and features. (C) 2017 Elsevier B.V. All rights reserved.