Publications

The Incidence of VAT Reforms in Electricity Markets: Evidence from Belgium (joint with J. Hindriks). International Journal of Industrial Organization (Forthcoming).

Abstract: In April 2014, the Belgian government reduced the VAT rate on the electricity price from 21% to 6% to support low-income families. In September 2015, under the newly elected government, the tax cut was repealed, and the VAT rate was reinstated to 21% in the context of a general tax shift from labour to consumption. This paper investigates the impact of such temporary and (plausibly) exogenous VAT reform on the Belgian electricity market. We study the pass-through of the VAT reform to electricity prices and the effect of this (exogenous) price change on electricity demand. We estimate the VAT pass-through on residential electricity price by a difference-in-differences method, using business electricity prices (not subject to VAT) as a control group. To assess the impact of the VAT change on demand, we perform an event study on the electricity flowed monthly over the grid at the network operator level. Our findings reveal that both the tax cut and the tax hike were entirely shifted to the electricity price (100% pass-through). Exploiting different sources of price variation, our results show a price elasticity of residential demand for electricity between -0.09 and -0.17. Interestingly, we also find that demand reacted quickly and symmetrically to the VAT cut and the subsequent VAT hike. JEL No: H21, H22, H23, Q41, Q48. Keywords: tax incidence, VAT reform, demand elasticity, electricity markets.

Heterogeneity in the tax pass-through to spirit retail prices: Evidence from Belgium (joint with J. Hindriks). Journal of Public Economics. 2019. 176, 142-160. [Vox column, 19 April 2019]

Abstract: On 1st November 2015, the Belgian government increased the excise tax on alcoholic beverages. For spirits with 40% of alcohol and bottle size of 70 cl, this tax change is equivalent to an amount of 2,43 € per bottle of spirits. This paper studies the impact of this tax reform at the store level on the (posted) retail price of six major brands of spirits, using a difference-in-differences method. The estimation is based on a balanced panel of scanner data from a major supermarket chain (with a 33% market share) and uses the retail prices of the same brands sold in France by the same supermarket chain as a control group. Having information on each store location, we show spatial variations in the tax pass-through for homogeneous products. We find that these variations are strongly related to the intensity of local competition and to a lesser extent to the proximity to the borders (mainly with Luxembourg which is the low-price country). We find that the tax was quickly passed through during the first month of tax implementation and that it was mostly over-shifted. However, we also find that both the border and the competition effects are not instantaneous, but arise several months after the tax reform. These findings have important implications for alcohol control policies as they highlight that the incidence of alcohol taxation can vary greatly across space and affect differently households depending on where they live. JEL No: H2, H22, H32, H71, I18. Keywords: Tax pass-through, Scanner data, Competition, Cross-border shopping.

Working Papers

Promotion ban and heterogeneity in retail prices during the Great Lockdown (joint with J. Hindriks & L. Madio). CESifo Working Paper, 2021.

Abstract: We study the impact of the Belgium lockdown on retail prices using a unique dataset tracking daily prices and promotions for various products in different stores and retail chains. Two distinctive features of our analysis are the ban on promotions during the first two weeks of the lockdown, and the presence of local pricing retail chains (LP) competing with uniform (national) pricing retail chains (UP). We decompose the price changes into the regular price, the frequency, and the size of promotions. The sale price (i.e., the price paid by consumer purchasing on “sale”) increased by 7% within two weeks and by 2.5% within three months. We then provide an heterogeneity analysis of the regular price variation across stores, retailers, products, and over time. We show that LP chains reacted the most to the lockdown with spatial heterogeneity. The heterogeneity in price response also suggests that the price increase was not driven by cost inflation. JEL No: D22, E30, E31, L11. Keywords: COVID-19, pricing, lockdown, retailers.

Do Sugar Taxes affect the right consumers? CORE Discussion Paper, Université Catholique de Louvain, No. 2019/17, October 2019.

Abstract: Sugar taxes are often considered as a possible tool to tackle excessive sugar consumption. This paper estimates a dynamic multinomial Logit model of cola demand on a novel supermarket scanner dataset in order to study preference heterogeneity and state dependence in product choice. The model estimates allow evaluating the effectiveness of taxation in reducing demand for sugary colas across different consumer types. The results show that a sugar tax would be less effective among the targeted population of heavy sugar consumers. This policy, however, would be more effective among low-income households. Tax policy simulations show that a specific tax on sugar should be preferred to an ad-valorem tax on sugary colas on both corrective and equity grounds. This is because ad-valorem taxes can lead low-income households and heavy sugar consumers to substitute from expensive to cheaper sugary brands. Lastly, because households exhibit state dependence in cola choice, sugar taxes would be more effective in reducing sugar consumption in the long-run. JEL No: D12, H31, I18, Q18. Keywords: heterogeneity in preferences, state dependence, sugar taxes, discrete choice models.

Policy Papers and Press Articles

Baisse de la TVA dans l’Horeca et les métiers de contact : des effets surprenants. Regards économiques - Focus 17 - mai 2021.

Les effets inattendus de la baisse de la TVA dans l’horeca et les métiers de contact. Le Soir. 04.05.2021. [link]

Tackling Child and Adolescent Obesity: An Economic Challenge. 2016. In M.L. Frelut (Ed.). The ECOG’s eBook on Child and Adolescent Obesity. [link]

Reducing Obesity in an Economic and Public Health Perspective. 2015. Acta Paediatrica, 104, S466.