IDEAS home Printed from https://ideas.repec.org/p/wap/wpaper/2410.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    File URL: https://www.waseda.jp/fpse/winpec/assets/uploads/2025/01/55734c451e0c81d70a6bd84c3b60cf4b.pdf
    File Function: First version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marion, Justin & Muehlegger, Erich, 2011. "Fuel tax incidence and supply conditions," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1202-1212, October.
    2. Djanali, Iwan & Sheehan-Connor, Damien, 2012. "Tax affinity hypothesis: Do we really hate paying taxes?," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 758-775.
    3. Andreoni, James & Petrie, Ragan, 2004. "Public goods experiments without confidentiality: a glimpse into fund-raising," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1605-1623, July.
    4. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    5. Hanson, Andrew & Sullivan, Ryan, 2009. "The Incidence of Tobacco Taxation: Evidence From Geographic Micro-Level Data," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(4), pages 677-698, December.
    6. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    7. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70(2), pages 111-111.
    8. Sharat Ganapati & Joseph S. Shapiro & Reed Walker, 2020. "Energy Cost Pass-Through in US Manufacturing: Estimates and Implications for Carbon Taxes," American Economic Journal: Applied Economics, American Economic Association, vol. 12(2), pages 303-342, April.
    9. Gareth D. Myles, 1995. "Imperfect Competition and Industry-Specific Input Taxes," Public Finance Review, , vol. 23(3), pages 336-355, July.
    10. Slemrod, Joel, 1990. "Optimal Taxation and Optimal Tax Systems," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 157-178, Winter.
    11. John A. List, 2004. "Testing Neoclassical Competitive Theory in Multilateral Decentralized Markets," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 1131-1156, October.
    12. James Alm & William D. Schulze & Carrie von Bose & Jubo Yan, 2019. "Appeals to Social Norms and Taxpayer Compliance," Southern Economic Journal, John Wiley & Sons, vol. 86(2), pages 638-666, October.
    13. Kallbekken, Steffen & Kroll, Stephan & Cherry, Todd L., 2011. "Do you not like Pigou, or do you not understand him? Tax aversion and revenue recycling in the lab," Journal of Environmental Economics and Management, Elsevier, vol. 62(1), pages 53-64, July.
    14. Doyle Jr., Joseph J. & Samphantharak, Krislert, 2008. "$2.00 Gas! Studying the effects of a gas tax moratorium," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 869-884, April.
    15. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    16. Vinish Shrestha & Sara Markowitz, 2016. "The Pass-Through Of Beer Taxes To Prices: Evidence From State And Federal Tax Changes," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1946-1962, October.
    17. Matthew Harding & Ephraim Leibtag & Michael F. Lovenheim, 2012. "The Heterogeneous Geographic and Socioeconomic Incidence of Cigarette Taxes: Evidence from Nielsen Homescan Data," American Economic Journal: Economic Policy, American Economic Association, vol. 4(4), pages 169-198, November.
    18. Joel Slemrod, 2019. "Tax Compliance and Enforcement," Journal of Economic Literature, American Economic Association, vol. 57(4), pages 904-954, December.
    19. Fox, William F. & Hargaden, Enda Patrick & Luna, LeAnn, 2022. "Statutory incidence and sales tax compliance: Evidence from Wayfair," Journal of Public Economics, Elsevier, vol. 213(C).
    20. Poterba, James M., 1996. "Retail Price Reactions to Changes in State and Local Sales Taxes," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(2), pages 165-176, June.
    21. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
    22. Carbonnier, Clement, 2007. "Who pays sales taxes? Evidence from French VAT reforms, 1987-1999," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1219-1229, June.
    23. Wenzel, Michael, 2005. "Misperceptions of social norms about tax compliance: From theory to intervention," Journal of Economic Psychology, Elsevier, vol. 26(6), pages 862-883, December.
    24. Besley, Timothy J. & Rosen, Harvey S., 1999. "Sales Taxes and Prices: An Empirical Analysis," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 157-178, June.
    25. Poterba, James M., 1996. "Retail Price Reactions to Changes in State and Local Sales Taxes," National Tax Journal, National Tax Association, vol. 49(2), pages 165-76, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Asatryan, Zareh & Gomtsyan, David, 2020. "The incidence of VAT evasion," ZEW Discussion Papers 20-027, ZEW - Leibniz Centre for European Economic Research.
    2. Panayiota Lyssiotou & Elena Savva, 2021. "Who pays taxes on basic foodstuffs? Evidence from broadening the VAT base," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(1), pages 212-247, February.
    3. Kosonen, Tuomas, 2015. "More and cheaper haircuts after VAT cut? On the efficiency and incidence of service sector consumption taxes," Journal of Public Economics, Elsevier, vol. 131(C), pages 87-100.
    4. Fox, William F. & Hargaden, Enda Patrick & Luna, LeAnn, 2022. "Statutory incidence and sales tax compliance: Evidence from Wayfair," Journal of Public Economics, Elsevier, vol. 213(C).
    5. Caitlan Russell & Corne van Walbeek, 2016. "How does a Change in the Excise Tax on Beer Impact Beer Retail Prices in South Africa?," South African Journal of Economics, Economic Society of South Africa, vol. 84(4), pages 555-573, December.
    6. Raymundo M. Campos-Vázquez & Eduardo M. Medina-Cortina, 2019. "Pass-through and competition: the impact of soft drink taxes as seen through Mexican supermarkets," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-23, December.
    7. Nicoletta Berardi & Patrick Sevestre & Marine Tépaut & Alexandre Vigneron, 2016. "The impact of a ‘soda tax’ on prices: evidence from French micro data," Applied Economics, Taylor & Francis Journals, vol. 48(41), pages 3976-3994, September.
    8. Sharat Ganapati & Joseph S. Shapiro & Reed Walker, 2016. "The Incidence of Carbon Taxes in U.S. Manufacturing: Lessons from Energy Cost Pass-through," Cowles Foundation Discussion Papers 2038R, Cowles Foundation for Research in Economics, Yale University, revised Jan 2017.
    9. Kosonen, Tuomas, 2013. "More haircut after VAT cut? On the efficiency of service sector consumption taxes," Working Papers 49, VATT Institute for Economic Research.
    10. Caitlan Russell & Corne van Walbeek, 2016. "How does a change in the excise tax on beer impact beer retail prices in South Africa?," SALDRU Working Papers 162, Southern Africa Labour and Development Research Unit, University of Cape Town.
    11. Yilmazkuday, Hakan, 2017. "Asymmetric incidence of sales taxes: A short-run investigation of gasoline prices," Journal of Economics and Business, Elsevier, vol. 91(C), pages 16-23.
    12. Franz W. Wagner & Stefan Weber, 2016. "Wird die Umsatzsteuer überwälzt? [Do Firms Pass on VAT?]," Schmalenbach Journal of Business Research, Springer, vol. 68(4), pages 401-421, December.
    13. Sharat Ganapati & Joseph S. Shapiro & Reed Walker, 2020. "Energy Cost Pass-Through in US Manufacturing: Estimates and Implications for Carbon Taxes," American Economic Journal: Applied Economics, American Economic Association, vol. 12(2), pages 303-342, April.
    14. Sharat Ganapati & Joseph S. Shapiro & Reed Walker, 2016. "Energy Prices, Pass-Through, and Incidence in U.S. Manufacturing," Working Papers 16-27, Center for Economic Studies, U.S. Census Bureau.
    15. Dong, Changgui & Wiser, Ryan & Rai, Varun, 2018. "Incentive pass-through for residential solar systems in California," Energy Economics, Elsevier, vol. 72(C), pages 154-165.
    16. James C. Cox & Mark Rider & Astha Sen, 2012. "Tax Incidence: Do Institutions Matter? An Experimental Study," Experimental Economics Center Working Paper Series 2012-17, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University, revised Feb 2017.
    17. Thomas Crossley & Hamish Low & Cath Sleeman, 2014. "Using a temporary indirect tax cut as a fiscal stimulus: evidence from the UK," IFS Working Papers W14/16, Institute for Fiscal Studies.
    18. John Cawley & David Frisvold & David Jones & Chelsea Lensing, 2021. "The Pass‐Through of a Tax on Sugar‐Sweetened Beverages in Boulder, Colorado," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(3), pages 987-1005, May.
    19. Muhammad Salar Khan & Paul N. Thompson & Victor J. Tremblay, 2020. "Marijuana tax incidence, stockpiling, and cross-border substitution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(1), pages 103-127, February.
    20. Lesley Chiou & Erich Muehlegger, 2014. "Consumer Response to Cigarette Excise Tax Changes," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(3), pages 621-650, September.

    More about this item

    Keywords

    ordinary taxes; earmarked taxes; statutory incidence; market experiment;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wap:wpaper:2410. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Haruko Noguchi (email available below). General contact details of provider: https://edirc.repec.org/data/spwasjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.