Retail Bottle Pricing at the Border: Evidence of Cross-Border Shopping, Fraudulent Redemptions, and Use Tax Evasion
This paper examines the pattern of retail prices for deposit eligible goods near Michigan’s borders. Michigan’s unique bottle redemption system and lower sales tax generate incentives for various potentially illegal household responses. Such incentives and behavior should be capitalized in the prices of affected goods. I empirically quantify the spatial price effects and find patterns consistent with theoretical predictions. Michigan’s border prices are higher (lower) for goods with higher (lower) per unit costs by up to 38%. Price-distance trends reflect the waning of these effects away from the border.
Niu, Ben J. (2017). "Retail Bottle Pricing at the Border: Evidence of Cross-Border Shopping, Fraudulent Redemptions, and Use Tax Evasion." Journal of Economic Geography 18.6, 1253-1283.
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This is a pre-copyedited, author-produced version of an article accepted for publication in Journal of Economic Geography following peer review. The version of record [Ben J. Niu; Retail bottle pricing at the border: evidence of cross-border shopping, fraudulent redemptions, and use tax evasion, Journal of Economic Geography, Volume 18, Issue 6, 1 November 2018, Pages 1253–1283] is available online at: https://doi.org/10.1093/jeg/lbx025