2014 Fiscal Year Final Research Report
Structural analysis on tax interaction between governments
| Project/Area Number |
24730286
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| Research Category |
Grant-in-Aid for Young Scientists (B)
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| Allocation Type | Multi-year Fund |
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| Research Field |
Public finance/Monetary economics
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| Research Institution | Setsunan University |
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Principal Investigator |
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| Project Period (FY) |
2012-04-01 – 2015-03-31
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| Keywords | tax interactions / commodity tax / cross-border shopping |
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| Outline of Final Research Achievements |
This paper constructs a structural model of tax interactions and estimates its parameters. The aim is to examine whether and why state governments respond to tax changes made by the federal and other state governments, using U.S gasoline and cigarettes taxes. We model the cross-border shopping decisions of shoppers and the state government’s objective function and derive the gradient of reaction functions to determine the existence of tax interactions. This method, unlike previous work, can take into account unobserved heterogeneity in consumer demand and preferences. The present model also allows more flexibility in functional form and heterogeneous responses across different states.
It is found that state governments do not change their tax rates in response to changes in the tax rate in neighboring states, since cross-border shoppers are insensitive to tax rate change. State governments do, however, raise their tax rates if the federal government raises its tax rate.
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| Free Research Field |
財政学
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