The Heterogeneous Tax Pass-Through Under Different Vertical Relationships

Abstract A large body of literature has examined the impact horizontal market structure on tax incidence consumers. However, extent to which vertical affects pass-through—which might be particularly relevant in presence double marginalisation problem—is an unexplored question. Using a confidential dataset gas station contracts with major Spanish refiner, combination their retail fuel prices and characteristics, we document that pass-through is about 38% higher vertically integrated stations than independent ones. Our estimates allow us assess government revenue emissions under different counterfactual scenarios.