Discussion paper

DP18179 VAT Pass-Through and Competition: Evidence from the Greek Islands

We examine how competition affects VAT pass-through in isolated oligopolistic markets as defined by the Greek islands. Using daily gasoline prices and a difference-in-differences methodology, we investigate how changes in VAT rates are passed through to consumers in islands with different market structure. We show that pass-through increases with competition, going from 50% in monopoly to around 80% in more competitive markets, but remains incomplete. We also discover a rapid rate of adjustment for VAT changes, as well as a positive relationship between competition and the rate of price adjustment. Finally, we document higher pass-through for products with more inelastic demand.


Dimitrakopoulou, L, C Genakos, T Kampouris and S Papadokonstantaki (2023), ‘DP18179 VAT Pass-Through and Competition: Evidence from the Greek Islands‘, CEPR Discussion Paper No. 18179. CEPR Press, Paris & London. https://cepr.org/publications/dp18179