TY  - RPRT
        AU  - Wozny, Florian
        TI  - Tax Incidence in Heterogeneous Markets: The Pass-through of Air Passenger Taxes on Airfares
        PY  - 2024/Feb/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 16783
        UR  - https://www.iza.org/publications/dp16783
        AB  - The tax incidence is central to the effectiveness of taxation. In this paper, I examine the pass-through rate of an air passenger tax to airfares. Additionally, I analyse its impact on passenger numbers, air transport capacity, and the interaction with supply and demand elasticity. For identification, I exploit the implementation of an air passenger tax on worldwide departures from Sweden and compare them with similar departures from Denmark and Finland with no such air passenger tax implementation. For the analysis, I use a unique data set of the universe of worldwide airline bookings. On average, airlines choose an immediate and nearly full pass-through of taxes. Consistent with theoretical priors for oligopolistic markets, tax incidence increases with competition but decreases with lower demand elasticity. Furthermore, the air passenger tax reduces passenger numbers and air transport capacity significantly.
        KW  - tax incidence
KW  - competition
KW  - air passenger tax
KW  - environmental policy
        ER  -