The Effect of the Harmonized Sales Tax on Consumer Prices and Spending in Atlantic Canada

Description

This paper examines the effect of the Harmonized Sales Tax (HST) on consumer prices and spending from April 1997 to March 1999. Using aggregate and disaggregate (eight-component) consumer price index (CPI) data for the three participating Atlantic Canada provinces and for Ontario (as the "control "province), we conduct counter-factual analysis and find that, ceteris paribus, consumer prices were lower in all three participating provinces during this period. We also find that political support for the HSTwas relatively stronger in Newfoundland, the province in which consumers have benefited the most from the HST.