Tax design in the alcohol market

Rachel Griffith, Helen Miller, Martin O'Connell

Research output: Contribution to journalArticlepeer-review


Alcohol consumption generates negative externalities that are non-linear in the total amount of alcohol consumed. If tastes for products are heterogeneous and correlated with marginal externalities, then varying tax rates on different products can lead to welfare gains. We study this problem in an optimal tax framework and empirically for the UK market. We find that heavy drinkers have systematically different patterns of alcohol demands and welfare gains from optimally varying rates are higher the more concentrated externalities are among heavy drinkers.

Original languageEnglish
Pages (from-to)20-35
Number of pages16
JournalJournal of Public Economics
Early online date16 Jan 2019
Publication statusPublished - 1 Apr 2019


  • Alcohol
  • Corrective taxes
  • Externality


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