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Alcohol Taxes Vs. Preventative Measures: A Theoretical Note

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  • Pa Black

Abstract

The paper assumes that damages in the form of deaths and traumatic injuries caused by alcohol‐related road accidents constitute a significant part of the negative externalities associated with alcohol consumption. It then compares the conventional Pigouvian solution with the impact that a sufficiently high penalty on drunken driving and better law enforcement may have. It is hypothesised that these measures may cause heavy drinkers either to cut back on their consumption of alcohol on occasions when they have to drive a vehicle or to maintain their consumption levels but refrain from driving. The welfare losses are much lower for each of these scenarios and are also carried specifically by those responsible for the negative externality. An attempt is also made to consider how individuals may respond to higher penalties and/or a more effective law enforcement system.

Suggested Citation

  • Pa Black, 2008. "Alcohol Taxes Vs. Preventative Measures: A Theoretical Note," South African Journal of Economics, Economic Society of South Africa, vol. 76(4), pages 607-611, December.
    • Handle: RePEc:bla:sajeco:v:76:y:2008:i:4:p:607-611
    DOI: 10.1111/j.1813-6982.2008.00213.x
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    References listed on IDEAS

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    1. Kenkel, Donald S, 1993. "Drinking, Driving, and Deterrence: The Effectiveness and Social Costs of Alternative Policies," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 877-913, October.
    2. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    3. Pogue, Thomas F & Sgontz, Larry G, 1989. "Taxing to Control Social Costs: The Case of Alcohol," American Economic Review, American Economic Association, vol. 79(1), pages 235-243, March.
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