VATT Institute for Economic Research

Rural low-income households bear a larger share of fuel carbon taxes

A study published in the Journal of Environmental Economics and Management finds that residents in low-income and rural areas are disproportionately affected by increases in fuel carbon taxes. The researchers discover significant differences across regions and income groups, with higher price pass-through rates in rural areas.

SourceVATT Institute for Economic Research·JournalJournal of Environmental Economics and Management·TypeData/statistical analysis·DateFeb 17, 2022

Firm-level payroll tax cuts may alleviate unemployment during economic downturns

A study by Youssef Benzarti and Jarkko Harju found that regional payroll tax cuts in Finland reduced negative effects of the Great Recession on employment, particularly among men and low-skilled employees. The cuts also relaxed liquidity constraints for firms, making them more resilient during downturns.

SourceVATT Institute for Economic Research·JournalJournal of Public Economics·DateSep 20, 2021

VAT cuts do not increase consumer purchasing power

A recent EU study found that VAT cuts are less likely to be passed on to consumer prices than hikes, with firms instead using the reduction to improve finances. The study analyzed over 2800 commodities and found that prices tend to rise 3-4 times more after a VAT hike.

SourceVATT Institute for Economic Research·JournalJournal of Political Economy·DateSep 1, 2020