Working Paper: NBER ID: w23848
Authors: Youssef Benzarti; Dorian Carloni
Abstract: In this paper we evaluate the incidence of a large cut in value-added taxes (VAT) for French sit-down restaurants. In contrast to previous studies that focus on prices only, we estimate its effect on four groups: workers, firm owners, consumers and suppliers of material goods. Using a difference-in-differences strategy on firm-level data we find that: (1) the effect on consumers was limited, (2) employees and sellers of material goods shared 25 and 16 percent of the total benefit, and (3) the reform mostly benefited owners of sit-down restaurants, who pocketed 41 percent of the tax cut.
Keywords: Value-added tax; Consumption tax incidence; Fiscal policy; Economic stimulus
JEL Codes: H20; H22; H23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| VAT reform (H25) | consumers benefit (D18) |
| VAT reform (H25) | employees benefit (J32) |
| VAT reform (H25) | sellers of material goods benefit (D16) |
| VAT reform (H25) | restaurant owners benefit (D33) |
| VAT reform (H25) | prices charged by sit-down restaurants (L11) |
| VAT reform (H25) | costs of labor and materials (J30) |
| prices charged by sit-down restaurants (L11) | restaurant owners profits (D33) |
| costs of labor and materials (J30) | restaurant owners profits (D33) |