Practice Job Talk: Matias Strehl-Pessina, University of California, Santa Barbara

Speaker

Matias Strehl-Pessina, University of California, Santa Barbara

Biography

Matias Strehl-Pessina is a Ph.D. candidate in Economics at the University of California, Santa Barbara. His research is in public economics, development economics, and political economy, with a focus on taxation, tax incidence, tax compliance, inequality, redistribution, and public policy. His job market paper studies a targeted VAT exemption for low-income households in Uruguay delivered through a welfare program debit card. Using administrative program records and detailed retail price data, he examines whether targeted VAT exemptions reach low-income beneficiaries or are partly captured by retailers through higher posted prices. He finds that price responses are limited and highly concentrated in small stores that represent a low share of program purchases, suggesting that targeted VAT exemptions can be an effective and efficient way of addressing VAT regressivity compared to traditional food exemptions. More broadly, his research examines how the tax and transfer system redistributes resources in practice, and how individuals and firms respond to the incentives created by policy design and enforcement.

Title

"Can Targeted VAT Exemptions Make VAT Less Regressive? Evidence from a Welfare-Program Reform in Uruguay"

Abstract

VAT taxes are a major source of public revenue, especially in Latin America, but they are often regressive. Traditional VAT exemptions for basic goods are costly, poorly targeted, and may be partly captured by firms through higher retail prices. This paper studies an alternative policy design: a targeted VAT rebate for low-income households beneficiaries of a welfare program. I ask whether participating retailers responded by increasing posted prices, thereby capturing part of the intended benefit. Combining administrative program records with scanner retail data, I use a difference-in-differences design comparing stores with different pre-reform exposure to program-card sales. I find that posted prices increased by about 3 to 4 percent only in stores highly dependent on program sales, which represent a small share of total program purchases. For most program purchases, prices did not increase. The results suggest that targeted VAT exemptions can reduce VAT regressivity while avoiding fiscal spending on higher-income households and minimizing retailer capture, though market conditions remain important for incidence.

JEL Clasification Codes: H21, H22, H23, I38, L81, O12