Do Taxes Produce Better Wine?

Research output: Working paperResearch

  • Jan Martin Ljunge
Theory predicts that unit taxes increase the quality consumed in a market since unit taxes reduce the relative price of high quality goods. Ad valorem taxes, on the other hand, have no effect on relative prices and should not affect product quality. The hypothesis is tested empirically in the US wine market. I find that the market share of high quality wine is significantly increased by unit taxes and that there is no significant effect of ad valorem taxes, in accordance with the hypothesis and previous empirical studies.
Original languageEnglish
PublisherDepartment of Economics, University of Copenhagen
Number of pages20
Publication statusPublished - 2011

ID: 35372869