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Finance and Economics Discussion Series: Salience and Taxation: Theory and Evidence

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Finance and Economics Discussion Series: Salience and Taxation: Theory and Evidence

4.85 34,356 ratings · 2,253 reviews
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Overview: This paper presents evidence that consumers underreact to taxes that are not salient and characterizes the welfare consequences of tax policies when agents make such optimization errors. The empirical evidence is based on two complementary strategies. First, we conducted an experiment at a grocery store posting tax inclusive prices for 750 products subject to sales tax for a three week period. Scanner data show that this intervention reduced demand for the treated products by 8 percent. Second, we find that state-level increases in excise taxes (which are included in posted prices) reduce alcohol consumption significantly more than increases in sales taxes (which are added at the register and are hence less salient). We develop simple, empirically implementable formulas for the incidence and efficiency costs of taxation that account for salience effects as well as other optimization errors. Contrary to conventional wisdom, the formulas imply that the economic incidence of a tax depends on its statutory incidence and that a tax can create deadweight loss even if it induces no change in demand. Our method of welfare analysis yields robust results because it does not require specification of a positive theory for why agents fail to optimize with respect to tax policies.

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Language En-US
Published February 5, 2013
ISBN 20431242
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Raj Chetty writes contemporary fiction and has always been fascinated by character-driven stories. They hold a degree in English Literature and previously worked as an editor before transitioning to writing their own books. Raj Chetty lives with their spouse and a very vocal rescue cat.

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A profoundly satisfying read. It strikes a perfect harmony of dialogue and world-building. Every chapter felt necessary. A true literary gem.
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Exceeded all my expectations. I became deeply invested in the protagonist's journey. A masterclass in storytelling. A true literary gem.
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Absolutely brilliant. I became deeply invested in the protagonist's journey. A masterclass in storytelling. An absolute must-read for connoisseurs of the genre.
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A profoundly satisfying read. I became deeply invested in the protagonist's journey. A masterclass in storytelling. An effortless 5 stars.
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Such a rich narrative. The pacing was impeccable and the characters felt incredibly authentic. I was completely immersed. I am now a lifelong fan of this author.
Joseph Lee
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I was completely blown away. The author orchestrated a breathtaking finale. Truly a work of art. I am now a lifelong fan of this author.
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Honestly one of the most premium reading experiences lately. I became deeply invested in the protagonist's journey. A masterclass in storytelling. I am now a lifelong fan of this author.
Mary Walker
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Excellent, though slightly flawed. The protagonist was compelling, though some subplots felt slightly overshadowed. A very distinguished novel.
Emily Baker
Emily Baker February 03, 2024
Exceeded all my expectations. The author orchestrated a breathtaking finale. Truly a work of art. A true literary gem.
Sarah Thomas
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Exceeded all my expectations. The prose is exquisite. It’s accessible yet undeniably sophisticated. I will undoubtedly revisit this masterpiece.
Lisa Moore
Lisa Moore March 22, 2025
Took a moment to build, but the payoff was spectacular. Beautiful writing, though I craved slightly more depth in the lore. Still, undeniably engaging. A solid 4 stars from me.
Jessica Perez
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Excellent, though slightly flawed. A brilliant concept executed with flair. Just a few pacing choices I would change. A very distinguished novel.
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An acceptable diversion. Certain acts were fascinating, while others felt like a slight endeavor to complete. Unlikely to reread, but a reasonable expenditure of time.
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Exceeded all my expectations. I adored how the story unfolded. It kept me captivated without sacrificing elegance. An absolute must-read for connoisseurs of the genre.
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Kimberly Miller April 11, 2025
I find myself somewhat conflicted. The tempo was somewhat languid, and I found my mind wandering. Not poor, simply average. A fair 3 stars.
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Barbara Taylor May 30, 2025
Absolutely brilliant. The prose is exquisite. It’s accessible yet undeniably sophisticated. I will undoubtedly revisit this masterpiece.
Nicholas Flores
Nicholas Flores May 31, 2024
A very strong entry. The middle had a deliberate pace, but the climax was phenomenal. A wonderful companion for a quiet weekend.
Rebecca Lopez
Rebecca Lopez September 21, 2024
Honestly one of the most premium reading experiences lately. I became deeply invested in the protagonist's journey. A masterclass in storytelling. An effortless 5 stars.
Deborah Rivera
Deborah Rivera November 27, 2025
Honestly one of the most premium reading experiences lately. The pacing was impeccable and the characters felt incredibly authentic. I was completely immersed. Worth every moment spent reading.
Emily Thomas
Emily Thomas November 19, 2025
A highly sophisticated read. It held my rapt attention, even when certain twists were telegraphed. A solid 4 stars from me.
Ashley Nelson
Ashley Nelson October 21, 2024
Masterpiece from start to finish. The prose is exquisite. It’s accessible yet undeniably sophisticated. I am now a lifelong fan of this author.
Nicholas Cruz
Nicholas Cruz November 18, 2025
Took a moment to build, but the payoff was spectacular. A brilliant concept executed with flair. Just a few pacing choices I would change. A solid 4 stars from me.
Ryan Smith
Ryan Smith November 21, 2024
I thoroughly enjoyed the elegance of it. The protagonist was compelling, though some subplots felt slightly overshadowed. A solid 4 stars from me.
Stephanie Lee
Stephanie Lee May 22, 2025
Excellent, though slightly flawed. Beautiful writing, though I craved slightly more depth in the lore. Still, undeniably engaging. I would highly recommend this to discerning readers.
Laura Allen
Laura Allen February 09, 2025
Took a moment to build, but the payoff was spectacular. It held my rapt attention, even when certain twists were telegraphed. A wonderful companion for a quiet weekend.
James King
James King October 02, 2024
Not entirely to my refined tastes. It verged on repetitive in the second act. A more concise edit would have served it well. Perhaps more aligned with a different audience's tastes.
John Nelson
John Nelson October 20, 2025
I thoroughly enjoyed the elegance of it. The middle had a deliberate pace, but the climax was phenomenal. A wonderful companion for a quiet weekend.
Mark Johnson
Mark Johnson June 20, 2025
Masterpiece from start to finish. I became deeply invested in the protagonist's journey. A masterclass in storytelling. An effortless 5 stars.
Donna Smith
Donna Smith January 31, 2024
Exceeded all my expectations. I became deeply invested in the protagonist's journey. A masterclass in storytelling. I am now a lifelong fan of this author.
Dorothy Nelson
Dorothy Nelson November 14, 2024
Took a moment to build, but the payoff was spectacular. The middle had a deliberate pace, but the climax was phenomenal. A wonderful companion for a quiet weekend.
Cynthia Lewis
Cynthia Lewis March 02, 2025
I was completely blown away. I adored how the story unfolded. It kept me captivated without sacrificing elegance. A true literary gem.
Mary Roberts
Mary Roberts September 17, 2024
Exceeded all my expectations. It strikes a perfect harmony of dialogue and world-building. Every chapter felt necessary. Worth every moment spent reading.
Charles Phillips
Charles Phillips May 19, 2025
Not entirely to my refined tastes. The prose was competent, yet the characters lacked the depth I usually seek. Perfectly average.
Gary Mitchell
Gary Mitchell March 07, 2025
A very strong entry. It held my rapt attention, even when certain twists were telegraphed. Quite impressive overall.
Laura Smith
Laura Smith November 08, 2025
Exceeded all my expectations. The pacing was impeccable and the characters felt incredibly authentic. I was completely immersed. I will undoubtedly revisit this masterpiece.
Nicholas Jackson
Nicholas Jackson January 28, 2024
I was completely blown away. The author orchestrated a breathtaking finale. Truly a work of art. An absolute must-read for connoisseurs of the genre.
Richard Mitchell
Richard Mitchell October 19, 2024
Honestly one of the most premium reading experiences lately. The author orchestrated a breathtaking finale. Truly a work of art. I will undoubtedly revisit this masterpiece.
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