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Supply Side Incidence of Consumption Taxes

60 Pages Posted: 7 Mar 2016 Last revised: 20 Aug 2017

Kyle Rozema

University of Chicago - Law School

Date Written: October 5, 2016


I investigate the supply side incidence of commodity taxes. My empirical analysis employs a unique panel dataset of nearly 35,000 retail establishments that directly captures pricing behavior (markup) and profits generated from cigarette sales. Higher cigarette taxes drive down profits of convenience stores but not of grocery, drug, and liquor stores. Because a higher proportion of convenience stores are small businesses, my findings suggest that cigarette taxes are regressive on the supply side of the retail market.

Keywords: Tax Incidence, Consumption Taxes, Firm Behavior

JEL Classification: H22, H25, H32, L11, L13, L14, K34

Suggested Citation

Rozema, Kyle, Supply Side Incidence of Consumption Taxes (October 5, 2016). Available at SSRN: or

Kyle Rozema (Contact Author)

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States


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