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

Jongen,Egbert
; 
Lejour,Arjan
; 
Massenz,Gabriella
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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2018-06
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Tilburg University Research Output Collection
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VAT reform, Hairdressers, Differences-in-differences, Netherlands, TAXATION, C33 - Panel Data Models ; Spatio-temporal Models, H22 - Incidence, H25 - Business Taxes and Subsidies
Citation
Jongen, E, Lejour, A & Massenz, G 2018, 'Cheaper and more haircuts after VAT cut? Evidence from the Netherlands', Economist-Netherlands, vol. 166, no. 2, pp. 135-154. https://doi.org/10.1007/s10645-018-9315-1
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https://hdl.handle.net/20.500.14602/69143
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