Cross‐Border Shopping of Alcohol—What is the Effect on Tax Revenue and Sales and Which Products Are Most Affected?

ABSTRACT We use COVID‐19 border closings and comprehensive store‐level data on Norwegian alcohol sales to quantify the effect cross‐border shopping of alcohol on sales volume and commodity tax revenue. Effects are large, for instance, we estimate that commodity tax revenue for wine is about 20% lower because of cross‐border shopping. Using product level data we establish that effects come from across all products rather than just a few, but effects are especially marked for bag‐in‐box wines. Neither availability of the exact same product in Sweden nor idiosyncratic product‐level price difference with respect to Sweden has any marked effect on the impact of cross‐border shopping on sales.