Excise Duties and Cross-border Trade

Abstract

In this thesis I study the influence Norwegian excise have on the Norwegian/Swedish cross-border trade. I highlight relevant literatue and construct models to explain the consumer behavior mechanisms. I then run an OLS linear regression in order to study the interplay between taxes and weekly cross-border traffic. I find that Norwegian taxes have a significant impact on cross-border trade, but I also discover that so does several other economic variables. My conclusion becomes that it is hard to measure the exact influence caused by excise duties alone, since there is so many other factors involved. As taxes affect the Norwegian prices, poor and/or addicted people, in addition to the marginal consumers, tend to be the most responsive to tax changes.