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  4. November 2021
  5. Do Value-Added Taxes Affect International Trade Flows? Evidence from 30 Years of Tax Reforms

American Economic Journal:
Economic Policy

ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)

Do Value-Added Taxes Affect International Trade Flows? Evidence from 30 Years of Tax Reforms

  • Youssef Benzarti
  • Alisa Tazhitdinova
American Economic Journal: Economic Policy
vol. 13, no. 4, November 2021
(pp. 469–89)
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Abstract

This paper uses all value-added tax (VAT) changes across EU Member States from 1988 to 2016 to estimate the effect of VATs on trade flows. We find small elasticities of trade flows with respect to VATs, even when VAT changes are large. These elasticities are substantially smaller than the elasticities of trade flows with respect to tariffs estimated in the trade literature. This finding holds across different time periods, countries, and types of reforms. Our results imply that VATs are unlikely to distort trade flows.

Citation

Benzarti, Youssef, and Alisa Tazhitdinova. 2021. "Do Value-Added Taxes Affect International Trade Flows? Evidence from 30 Years of Tax Reforms." American Economic Journal: Economic Policy, 13 (4): 469–89. DOI: 10.1257/pol.20190492

Additional Materials

JEL Classification

  • F13 Trade Policy; International Trade Organizations
  • F14 Empirical Studies of Trade
  • H25 Business Taxes and Subsidies including sales and value-added (VAT)
  • H87 International Fiscal Issues; International Public Goods
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