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The Impact of Earmarked Taxes on Supply Curve Shifts: A Laboratory Experiment

Author

Listed:
  • Shigeharu Okajima

    (Department of Economics, Osaka University of Economics)

  • Taro Shinoda

    (Shinshu University)

  • Yukihiko Funaki

    (School of Political Science and Economics, Waseda University)

  • Hiroko Okajima

    (School of Economics, Nagoya University)

Abstract

In this study, we examine how ordinary taxes and earmarked taxes influence tax passthrough in a market experiment. We hypothesize that tax pass-through is lower for earmarked taxes than for ordinary taxes and that this difference depends on market conditions, specifically the balance between the trade surpluses for sellers and buyers. Our findings confirm that ordinary taxes result in full tax pass-through, whereas earmarked taxes result in less pass-through. Under earmarked taxes, sellers adjust the level of pass-through based on their trade surplus relative to the buyers’ trade surplus. These results underscore the need to distinguish between tax types. The results of our study provide novel insights into the resource allocation effects of different tax types, offering significant implications for policymakers seeking to regulate goods with externalities through taxation.

Suggested Citation

  • Shigeharu Okajima & Taro Shinoda & Yukihiko Funaki & Hiroko Okajima, 2025. "The Impact of Earmarked Taxes on Supply Curve Shifts: A Laboratory Experiment," Working Papers 2410, Waseda University, Faculty of Political Science and Economics.
  • Handle: RePEc:wap:wpaper:2410
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    References listed on IDEAS

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    More about this item

    Keywords

    ordinary taxes; earmarked taxes; statutory incidence; market experiment;
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