Tax design in the alcohol market

Rachel Griffith; Helen Miller; Martin O'Connell

doi:10.1016/j.jpubeco.2018.12.005

Tax design in the alcohol market

Rachel Griffith, Helen Miller, Martin O'Connell

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

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 language	English
Pages (from-to)	20-35
Number of pages	16
Journal	Journal of Public Economics
Volume	172
Early online date	16 Jan 2019
DOIs	https://doi.org/10.1016/j.jpubeco.2018.12.005
Publication status	Published - 1 Apr 2019

Keywords

Alcohol
Corrective taxes
Externality

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10.1016/j.jpubeco.2018.12.005Licence: CC BY-NC-ND

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title = "Tax design in the alcohol market",

abstract = "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.",

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KW - Externality

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Tax design in the alcohol market

Abstract

Keywords

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