Matías Strehl Pessina

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.

Research Interests

Taxation, Tax Incidence, Tax Compliance, Inequality, Redistribution, Public Policy

Job Market Paper Title

“Do Targeted Tax Breaks Make Value-Added Taxes Less Regressive?”

Abstract

Value-added taxes (VAT) are a major source of revenue but can be regressive. The traditional approach to addressing VAT regressivity—exemptions or reduced rates for basic goods—is costly and poorly targeted. This paper studies an alternative: a VAT break for low-income households enrolled in a welfare program who use a program card to buy basic goods at participating stores. Using scanner data covering the universe of participating retailers, I document that the VAT break was implemented across stores and that beneficiaries exhausted their available benefits. I then use a difference-in-differences design comparing prices at stores with high and low pre-reform exposure to program-card sales. I estimate that 97.7% of the VAT break is passed through to beneficiaries on average. Pass-through falls to 76.8% at the most exposed stores, but these stores account for a small share of program purchases. The findings suggest that targeted VAT relief can reduce VAT regressivity without extending benefits to higher-income households, while limiting retailer capture overall, although market conditions remain important for incidence.