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

Egbert Jongen; Arjan Lejour; Gabriella Massenz

doi:10.1007/s10645-018-9315-1

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

Egbert Jongen^*, Arjan Lejour, Gabriella Massenz

^*Corresponding author for this work

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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 language	English
Pages (from-to)	135-154
Journal	Economist-Netherlands
Volume	166
Issue number	2
DOIs	https://doi.org/10.1007/s10645-018-9315-1
Publication status	Published - Jun 2018

Keywords

VAT reform
Hairdressers
Differences-in-differences
Netherlands
TAXATION

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10.1007/s10645-018-9315-1

s10645-018-9315-1Final published version, 780 KBLicence: Taverne

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title = "Cheaper and more haircuts after VAT cut?: Evidence from the Netherlands",

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.",

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AU - Massenz, Gabriella

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N2 - 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.

AB - 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.

KW - VAT reform

KW - Hairdressers

KW - Differences-in-differences

KW - Netherlands

KW - TAXATION

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DO - 10.1007/s10645-018-9315-1

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JF - Economist-Netherlands

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

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Keywords

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