Salience and Taxation: Theory and Evidence

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Salience and Taxation: Theory and Evidence

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dc.contributor.author Looney, Adam
dc.contributor.author Kroft, Kory
dc.contributor.author Chetty, Raj
dc.date.accessioned 2012-10-16T14:36:26Z
dc.date.issued 2009
dc.identifier.citation Chetty, Raj, Adam Looney, and Kory Kroft. 2009. Salience and taxation: theory and evidence. American Economic Review 99(4): 1145–1177. en_US
dc.identifier.issn 0002-8282 en_US
dc.identifier.uri http://nrs.harvard.edu/urn-3:HUL.InstRepos:9748525
dc.description.abstract Using two strategies, we show that consumers underreact to taxes that are not salient. First, using a field experiment in a grocery store, we find that posting tax-inclusive price tags reduces demand by 8 percent. Second, increases in taxes included in posted prices reduce alcohol consumption more than increases in taxes applied at the register. We develop a theoretical framework for applied welfare analysis that accommodates salience effects and other optimization failures. The simple formulas we derive imply that the economic incidence of a tax depends on its statutory incidence, and that even policies that induce no change in behavior can create efficiency losses. en_US
dc.description.sponsorship Economics en_US
dc.language.iso en_US en_US
dc.publisher The American Economic Association en_US
dc.relation.isversionof doi:10.1257/aer.99.4.1145 en_US
dc.relation.hasversion http://www.nber.org/papers/w13330 en_US
dc.relation.hasversion http://www.economics.harvard.edu/app/webroot/files/faculty/1238_taxsalience_nber.pdf en_US
dash.license OAP
dc.subject economics en_US
dc.subject elasticity en_US
dc.subject income en_US
dc.title Salience and Taxation: Theory and Evidence en_US
dc.type Journal Article en_US
dc.description.version Author's Original en_US
dc.relation.journal American Economic Review en_US
dash.depositing.author Chetty, Raj
dc.date.available 2012-10-16T14:36:26Z

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  • FAS Scholarly Articles [7470]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University

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