An Impact Evaluation of the German Aviation Tax
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Wageningen University – Social Sciences MSc Thesis Chair Group Environmental Economics and Natural Resources An Impact Evaluation of the German Aviation Tax – DiD it Matter? Viola Elisabeth Helmers 941225321010 February 2020: Management, Economics and Consumer Studies Economics and Governance Thesis Code: ENR-80430 Supervisors: Prof. Dr. Edwin van der Werf Prof. Dr. Jan Börner (Rheinische Friedrich-Wilhelms Universität Bonn) Second Examiner: Prof. Dr. Hans-Peter Weikard (Wageningen University and Research) Date of Submission: 18.02.2020 Date of Examination: 20.02.2020 2 RHEINISCHE FRIEDRICH-WILHELMS-UNIVERSITÄT BONN Faculty of Agriculture MASTERTHESIS as part of the Master program Agricultural and Food Economics submitted in partial fulfilment of the requirements for the degree of „Master of Science“ An Impact Evaluation of the German Aviation Tax - DiD it Matter? submitted by Viola Elisabeth Helmers 2997433 submitted on 18.02.2020 First examiner: Prof. Dr. Edwin van der Werf (Wageningen University and Research) Second examiner: Prof. Dr. Jan Börner ii STATEMENT OF AUTHENTICITY Personal Declaration I hereby affirm that I have prepared the present thesis self-dependently, and without the use of any other tools, than the ones indicated. All parts of the text, having been taken over verbatim or analogously from published or not published scripts, are indicated as such. The thesis hasn’t yet been submitted in the same or similar form, or in extracts within the context of another examination. Bonn, 18.02.2020 __________________________________ Student’s signature iii iv ABSTRACT This thesis examines the impact of the German Aviation Tax on passenger numbers in the years after implementation. It does so through a Difference-in-differences approach, using panel data from Eurostat on passenger numbers for 77 EU airports in the years 2007 – 2017. The level of observation is the route, defined by an origin airport and a destination country. Data both with observations at annual level and at monthly level were utilized. Six models were specified, with incremental degrees of complexity with respect to variables and dummies used. Moreover, six additional models were estimated, to serve as sensitivity analysis of the main models. The regressions were computed using Fixed Effects, Random Effects, and Quasi-Maximum- Likelihood estimators in StataSE 15. A pre-computation analysis of the data revealed that the way transfer passengers at large airports are included in the data has a potential to bias results. Control for this potential bias was achieved by pre-selection of origin airports to be included in the analysis, based on individual airport characteristics. Results of the models were ambiguous. An effect on passenger numbers exclusive to after-2011 Germany was found and was estimated to be larger than reported in previous studies. The effect did not hold up to the inclusion of detailed dummies modelling policy changes at the annual airport level. Distinguishing between the three different tax rates and the respective destination zones made it necessary to disregard results pertaining to the more far-away ones, Zone 2 and 3, due to data limitations and violation of key Difference-in-differences analysis assumptions. Taking seasonal variation into account using monthly data led to results not fit for definitive conclusions about the tax but shone a light on the potentials of analysing seasonal policy effects due to clear differences between control units and those impacted by the tax. The main merit of this thesis lies in its furthering of comprehensive panel modelling of passenger numbers and its scrutiny of own and previous results. v ACKNOWLEDGEMENTS Several people helped this thesis become the in-depth document that it is. I first would like to thank my supervisor Edwin van der Werf for continuously making me think further, for wanting to discuss detail as much as underlying concepts, and for his undying excitement about the project. I also want to thank my second supervisor Jan Börner for introducing me to Impact Evaluation in the first place through his phenomenal course and for his feedback on the coding-side of things. I am thankful to the universities of Bonn and Wageningen for offering the unique opportunity of completing a degree at both institutions at the same time, and I am glad about the support we BOWACO students have received throughout this program. I would like to thank Michael Pietzonka from the Generalzolldirektion Dresden for kindly answering questions about the nature of the German Aviation Tax, and the creators of Stata and R for making analyses like these possible and enjoyable. Lastly, a huge thank you to Nadine Mingers, Miriam Kalkum, and Tina Hauptfeld for taking the time to read this thesis and giving me feedback on the contents and text. vi TABLE OF CONTENTS Abstract ................................................................................................................................................................... v Acknowledgements ................................................................................................................................................ vi List of Figures ........................................................................................................................................................ ix List of Tables .......................................................................................................................................................... x List of Acronyms ................................................................................................................................................... xi 1 Introduction ..................................................................................................................................................... 1 1.1 Problem Statement ................................................................................................................................. 1 1.2 Research Question ................................................................................................................................. 3 1.3 Methodology .......................................................................................................................................... 3 1.4 Outline of Report ................................................................................................................................... 4 2 Thematic Background ..................................................................................................................................... 5 2.1 Taxation in General ............................................................................................................................... 5 2.2 Taxes in Aviation................................................................................................................................... 6 2.3 The German Aviation Tax ..................................................................................................................... 9 3 Literature Review .......................................................................................................................................... 12 3.1 Overview ............................................................................................................................................. 12 3.2 Discussion of most relevant papers ..................................................................................................... 12 4 Methodology ................................................................................................................................................. 18 4.1 Impact Evaluation Methods ................................................................................................................. 18 4.2 Policy Impact as “Treatment” .............................................................................................................. 18 4.3 Data Context ........................................................................................................................................ 19 4.4 Possible Econometric Approaches....................................................................................................... 20 4.5 The Difference-in-differences approach ............................................................................................. 21 4.6 Panel Data Modelling .......................................................................................................................... 24 4.7 Model Specification ............................................................................................................................. 27 4.8 Testing the common trends assumption ............................................................................................... 34 4.9 Sensitivity Analysis ............................................................................................................................. 35 4.10 Covariates ............................................................................................................................................ 36 5 Data ............................................................................................................................................................... 41 5.1 Dependent variable .............................................................................................................................. 41 5.2 Bias due to transfer passengers: Airport