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Minimum unit prices for alcohol

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  • Calcott, Paul

Abstract

Minimum unit prices (MUPs) have been proposed on the grounds that they can reduce alcohol consumption of the heaviest drinkers, without significantly burdening moderate drinkers. This paper examines the case for MUPs in an optimal tax framework. Such a policy can improve welfare when two conditions are both satisfied. First, beverage quality and quantity should be substitutes. Second, there should be more distortion to consumption of cheaper alcohol than to more expensive varieties. The consequences of a MUP for the optimal corrective tax are explored with a calibrated numerical example. This example illustrates how the optimal tax rate might be higher when used in isolation, than when a MUP is also being used.

Suggested Citation

  • Calcott, Paul, 2019. "Minimum unit prices for alcohol," Journal of Health Economics, Elsevier, vol. 66(C), pages 18-26.
    • Handle: RePEc:eee:jhecon:v:66:y:2019:i:c:p:18-26
    DOI: 10.1016/j.jhealeco.2019.04.007
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    Cited by:

    1. Sébastien Lecocq & Valérie Orozco & Christine Boizot‑Szantai & Céline Bonnet & Fabrice Etilé, 2023. "Alcohol Price Regulation in France: Choosing a Reform Scenario to Achieve Public Health and Tax Fairness Objectives," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 541, pages 17-32.
    2. Gehrsitz, Markus & Saffer, Henry & Grossman, Michael, 2021. "The effect of changes in alcohol tax differentials on alcohol consumption," Journal of Public Economics, Elsevier, vol. 204(C).
    3. Anurag Sharma & Brian Vandenberg, 2019. "Heterogenous wealth effects of minimum unit price on purchase of alcohol: Evidence using scanner data," PLOS ONE, Public Library of Science, vol. 14(12), pages 1-16, December.
    4. Paul Calcott, 2022. "Regulating ingredients in sin goods," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(3), pages 1120-1139, May.

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    More about this item

    Keywords

    Corrective taxes; Minimum unit price; Alcohol;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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