Food prices and tax incidence: evidence from Brazilian data
Maurício Canêdo-Pinheiro et al.
What the paper says
Purpose The paper estimates the ICMS (a kind of value-added tax at the state level) incidence on a basket of 79 food products from 1994 to 2021 in the Brazilian states of Bahia, Rio de Janeiro, Minas Gerais and São Paulo. Design/methodology/approach We use panel data estimators to evaluate the pass-through of the ICMS to consumer prices. Given that tax changes potentially influence prices of substitute and complementary products in the same geographic area, our empirical strategy relies on prices of similar products in other states to ensure causal identification. Findings The pass-through is neither complete nor immediate for many products, especially industrialized products, confirming the existing evidence for Brazil and other countries. On average, each percentage point of variation of the ICMS generates a cumulative variation of approximately 0.13% in prices. This variation takes 4 months after the change in the tax rate to be fully transmitted to final consumers. Originality/value Most of the literature focuses on developed countries. We innovate by using a novel database to estimate, with a solid causal identification strategy, the tax incidence for a broad basket of food products in a developing country. We also innovate by implementing a data-driven method for selecting lag length. The results can be helpful in the debate on tax reform underway in Brazil.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.50 × 0.4 = 0.20 |
| M · momentum | 0.50 × 0.15 = 0.07 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.