A Comment on “The Heterogeneous Tax Pass-Through Under Different Vertical Relationships” by Bajo-Buenestado and Borrella-Mas

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ID: 325015
2026
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Abstract
Abstract We revisit the heterogeneous tax pass-through analysis in Borrella-Mas (2022a) (B&B). We find that B&B’s estimating equation is misspecified, as it excludes a necessary lower-order interaction between vertical integration and the post-treatment period. Including this term reveals a significant structural price trend for vertically integrated firms in the post-reform period, whose origin is uncertain. A spatial placebo test confirms that this structural shift is present even in never-treated provinces, indicating that it is not a local, province-level pass-through of the regional tax. Without this control, the original specification may conflate this shift with the tax effect. Once the interaction is included, the differential pass-through estimate becomes null for diesel, while for gasoline a significant effect persists—albeit at a reduced magnitude—supporting B&B’s central claim that market structure matters for tax pass-through. These findings highlight the importance of explicitly modelling group-specific time trends when estimating heterogeneous treatment effects in difference-in-differences designs.
Reference Key
openalex_W7203496051 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Ismail El Fassi, Saleh Zakerinia
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Journal the economic journal
Year 2026
DOI
10.1093/ej/ueag101
URL
https://doi.org/10.1093/ej/ueag101
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