Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/295806 
Authors: 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 16783
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
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.
Subjects: 
tax incidence
competition
air passenger tax
environmental policy
JEL: 
H22
L13
Q52
Document Type: 
Working Paper

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