Research

with Kyrre Rickertsen

Abstract

Cross-border shopping of alcoholic beverages reduces domestic tax revenues. In this article, we estimate the magnitude of Norwegian cross-border shopping of hard liquor and wine and its effects on tax revenues by using the travel restrictions during the COVID-19 pandemic as a natural experiment. The Norwegian alcohol retail market is controlled by a state monopoly (Vinmonopolet), and our data set includes the complete transaction data of Vinmonopolet. The effects are identified by using a difference-in-difference approach comparing changes in sales in stores with different driving time to the nearest cross-border alcohol store. We find statistically significant effects of cross-border shopping for driving times up to three hours. The reduced sales in the stores of Vinmonopolet are estimated to be about 9% for wine and 6% for hard liquor corresponding to almost one billion NOK in lost annual tax revenues. 

With Odd E. Nygård

Abstract

The conventional method of computing tax expenditures disregards behavioral effects. We consider the case of duty-free exemptions for alcohol and tobacco in Norway and show the effects of including these responses. Our results suggest that the tax expenditures computed by the conventional approach are reduced by more than one third when including all behavioral effects.