VAT cut on food fully reached consumers, shows study by economics PhD students
A new study by João Quelhas and Tiago Bernardino, PhD students in economics at Stockholm University, provides empirical evidence on the effects of a temporary VAT reduction on food prices in Portugal.
Tiago Bernardino and João Quelhas, PhD students in economics at Stockholm University. Photo: Rickard Kilström/Johanna Säll
João Quelhas and Tiago Bernardino, PhD students in economics at Stockholm University, have analyzed the effects of a temporary VAT reduction on selected food products in Portugal. The study is co-authored with Ricardo Duque Gabriel and Márcia Silva-Pereira, and published in the Journal of Public Economics, a leading journal in the field.
Using a novel dataset of daily online prices, the researchers show that the VAT cut was fully passed through to consumer prices. Prices fell upon implementation, remained lower during the entire period of the policy, and returned to their pre-policy trend once the tax rate was reinstated.
The researchers discuss two potential mechanisms behind the complete pass-through: the high salience of the reform in a context of elevated inflation, and a concurrent decline in producer prices. Their estimates suggest that the policy reduced the inflation rate by 0.68 percentage points on impact.
More about the study
The study, The full, persistent, and symmetric pass-through of a temporary VAT cut, is published in Journal of Public Economics, Volume 248, August 2025.
Tiago Bernardino is a PhD student at the IIES, Stockholm University.
João Quelhas is a PhD student at the Department of Economics, Stockholm University.
