Taxing for Takeoff: Estimating Airport Tax Incidence Through Natural Experiments
TripNotice.com; Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA)
University of California, Berkeley - Department of Civil and Environmental Engineering
January 14, 2010
We view the different start dates of U.S. airport taxes as replicated natural experiments. In each, a portion of plane tickets are subject to a new tax of $3. We show that airlines, in response, raise nonstop fares by $6.5 and overshift the tax onto their nonstop passengers; however, they keep connecting fares little changed and appear burdened by the tax. The results suggest that airport taxes and other similar taxes encourage airlines to provide more nonstop services, and we argue that these taxes can be redesigned to promote both efficiency and equity.
Number of Pages in PDF File: 19
Keywords: Airport Tax, Tax Incidence, Airline Pricing, Aviation Finance
JEL Classification: D43, H22, R48
Date posted: April 17, 2010
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