Cheaper and more haircuts after VAT cut? Evidence from the Netherlands

Egbert Jongen*, Arjan Lejour, Gabriella Massenz

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We study the effect of the reduction in the VAT rate on hairdresser services from 17.5 to 6% in the Netherlands in January 2000. Following Kosonen (J Public Econ 131:87-100, 2015), we use differences-in-differences to estimate the effects of this reform, with beauty salons as the main control group. In our preferred specification, we find close to full pass-through of the VAT cut into lower prices. However, we find no statistically or economically significant effect on the volume of sales or employment.

Original languageEnglish
Pages (from-to)135-154
JournalDe Economist
Volume166
Issue number2
DOIs
Publication statusPublished - Jun 2018

Keywords

  • VAT reform
  • Hairdressers
  • Differences-in-differences
  • Netherlands
  • TAXATION

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