Salience and Taxation: Theory and Evidence

Salience and Taxation: Theory and Evidence

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Salience and Taxation: Theory and Evidence

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