Excise Tax Setting in a Dynamic Space-Time Framework
31 Pages Posted: 1 Jul 2015
Date Written: June 29, 2015
This study develops a simple model for analyzing excise tax setting in a competitive framework. Then, this study utilizes a dynamic space-time panel econometric model to explore cigarette and beer tax rate setting from U.S. states from 1960-2007. The empirical findings support the model predictions. Both cigarette and beer taxes are highly persistent, but cigarette tax rates are more competitive (spatially correlated) across states.
Keywords: horizontal tax competition, dynamic space-time model, spatial econometrics
JEL Classification: C31, C23, H71, H73
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