IDEAS home Printed from https://ideas.repec.org/a/eee/jhecon/v66y2019icp18-26.html
   My bibliography  Save this article

Minimum unit prices for alcohol

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167629618300201
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jhealeco.2019.04.007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Anurag Sharma & Fabrice Etilé & Kompal Sinha, 2016. "The Effect of Introducing a Minimum Price on the Distribution of Alcohol Purchase: A Counterfactual Analysis," Health Economics, John Wiley & Sons, Ltd., vol. 25(9), pages 1182-1200, September.
    2. Alan Brennan & Petra Meier & Robin Purshouse & Rachid Rafia & Yang Meng & Daniel Hill‐Macmanus & Colin Angus & John Holmes, 2015. "The Sheffield Alcohol Policy Model – A Mathematical Description," Health Economics, John Wiley & Sons, Ltd., vol. 24(10), pages 1368-1388, October.
    3. Henry Saffer & Frank Chaloupka, 1994. "Alcohol Tax Equalization and Social Costs," Eastern Economic Journal, Eastern Economic Association, vol. 20(1), pages 33-43, Winter.
    4. Gibson, John & Kim, Bonggeun, 2013. "Quality, Quantity, and Nutritional Impacts of Rice Price Changes in Vietnam," World Development, Elsevier, vol. 43(C), pages 329-340.
    5. Griffith, Rachel & O’Connell, Martin & Smith, Kate, 2019. "Tax design in the alcohol market," Journal of Public Economics, Elsevier, vol. 172(C), pages 20-35.
    6. Nelson, Jon P., 2014. "Estimating the price elasticity of beer: Meta-analysis of data with heterogeneity, dependence, and publication bias," Journal of Health Economics, Elsevier, vol. 33(C), pages 180-187.
    7. B. Douglas Bernheim & Antonio Rangel, 2004. "Addiction and Cue-Triggered Decision Processes," American Economic Review, American Economic Association, vol. 94(5), pages 1558-1590, December.
    8. Peter A. Diamond, 1973. "Consumption Externalities and Imperfect Corrective Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(2), pages 526-538, Autumn.
    9. T Nesbit, 2007. "Excise Taxation and Product Quality: The Gasoline Market," Economic Issues Journal Articles, Economic Issues, vol. 12(2), pages 1-14, September.
    10. Jan De Loecker & Paul T. Scott, 2016. "Estimating market power Evidence from the US Brewing Industry," NBER Working Papers 22957, National Bureau of Economic Research, Inc.
    11. Kenkel, Donald S, 1996. "New Estimates of the Optimal Tax on Alcohol," Economic Inquiry, Western Economic Association International, vol. 34(2), pages 296-319, April.
    12. Thomas Aronsson & Tomas Sjögren, 2010. "An Optimal-Tax Approach to Alcohol Policy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 66(2), pages 153-169, June.
    13. Sobel, Russell S & Garrett, Thomas A, 1997. "Taxation and Product Quality: New Evidence from Generic Cigarettes," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 880-887, August.
    14. Vidar Christiansen & Stephen Smith, 2012. "Externality‐Correcting Taxes and Regulation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 358-383, June.
    15. Parry Ian W. H. & West Sarah E & Laxminarayan Ramanan, 2009. "Fiscal and Externality Rationales for Alcohol Policies," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-48, July.
    16. Ruhm, Christopher J. & Jones, Alison Snow & McGeary, Kerry Anne & Kerr, William C. & Terza, Joseph V. & Greenfield, Thomas K. & Pandian, Ravi S., 2012. "What U.S. data should be used to measure the price elasticity of demand for alcohol?," Journal of Health Economics, Elsevier, vol. 31(6), pages 851-862.
    17. Qiujie Zheng & H. Holly Wang, 2017. "Market Power in the Chinese Wine Industry," Agribusiness, John Wiley & Sons, Ltd., vol. 33(1), pages 30-42, January.
    18. Gruber, Jonathan & Koszegi, Botond, 2004. "Tax incidence when individuals are time-inconsistent: the case of cigarette excise taxes," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1959-1987, August.
    19. 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.
    20. Stockwell, T. & Zhao, J. & Giesbrecht, N. & Macdonald, S. & Thomas, G. & Wettlaufer, A., 2012. "The raising of minimum alcohol prices in Saskatchewan, Canada: Impacts on consumption and implications for public health," American Journal of Public Health, American Public Health Association, vol. 102(12), pages 103-110.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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).
    2. Paul Calcott, 2022. "Regulating ingredients in sin goods," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(3), pages 1120-1139, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karel Janda & Zuzana Lajksnerová & Jakub Mikolášek, 2019. "A General Equilibrium Model of Optimal Alcohol Taxation in the Czech Republic," Prague Economic Papers, Prague University of Economics and Business, vol. 2019(5), pages 589-611.
    2. Sijbren Cnossen, 2006. "Alcohol taxation and regulation in the European Union," CPB Discussion Paper 76.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Sijbren Cnossen & D. Forrest & S. Smith, 2009. "Taxation and regulation of smoking, drinking and gambling in the European Union," CPB Special Publication 76.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Cook, Philip J. & Moore, Michael J., 2000. "Alcohol," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 30, pages 1629-1673, Elsevier.
    5. DeCicca, Philip & Kenkel, Donald & Liu, Feng, 2013. "Excise tax avoidance: The case of state cigarette taxes," Journal of Health Economics, Elsevier, vol. 32(6), pages 1130-1141.
    6. Nelson Jon P. & Moran John R., 2020. "Effects of Alcohol Taxation on Prices: A Systematic Review and Meta-Analysis of Pass-Through Rates," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(1), pages 1-21, January.
    7. Evan Herrnstadt & Ian Parry & Juha Siikamäki, 2015. "Do alcohol taxes in Europe and the US rightly correct for externalities?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(1), pages 73-101, February.
    8. O'Donoghue, Ted & Rabin, Matthew, 2006. "Optimal sin taxes," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1825-1849, November.
    9. Indrek Saar, 2011. "Optimal alcohol taxation: Simulation results for Estonia," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 11(1), pages 65-90, July.
    10. James Fogarty & Giri Parameswaran, 2017. "Alcohol Sin Taxes," Working Papers 257211, University of Western Australia, School of Agricultural and Resource Economics.
    11. Parry, Ian W.H. & Laxminarayan, Ramanan & West, Sarah E., 2006. "Fiscal and Externality Rationales for Alcohol Taxes," Discussion Papers dp-06-51, Resources For the Future.
    12. Jon P. Nelson, 2014. "Gender Differences In Alcohol Demand: A Systematic Review Of The Role Of Prices And Taxes," Health Economics, John Wiley & Sons, Ltd., vol. 23(10), pages 1260-1280, October.
    13. Markus Haavio & Kaisa Kotakorpi, 2012. "Sin Licenses Revisited," CESifo Working Paper Series 4010, CESifo.
    14. Parry Ian W. H. & West Sarah E & Laxminarayan Ramanan, 2009. "Fiscal and Externality Rationales for Alcohol Policies," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-48, July.
    15. Khwaja, Ahmed & Silverman, Dan & Sloan, Frank, 2007. "Time preference, time discounting, and smoking decisions," Journal of Health Economics, Elsevier, vol. 26(5), pages 927-949, September.
    16. Harris, Mark N. & Ramful, Preety & Zhao, Xueyan, 2006. "An ordered generalised extreme value model with application to alcohol consumption in Australia," Journal of Health Economics, Elsevier, vol. 25(4), pages 782-801, July.
    17. Padmaja Ayyagari & Partha Deb & Jason Fletcher & William Gallo & Jody L. Sindelar, 2013. "Understanding Heterogeneity In Price Elasticities In The Demand For Alcohol For Older Individuals," Health Economics, John Wiley & Sons, Ltd., vol. 22(1), pages 89-105, January.
    18. Bossi, Luca & Calcott, Paul & Petkov, Vladimir, 2013. "Optimal tax rules and addictive consumption," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 984-1000.
    19. Christopher Carpenter & Carlos Dobkin, 2010. "Alcohol Regulation and Crime," NBER Chapters, in: Controlling Crime: Strategies and Tradeoffs, pages 291-329, National Bureau of Economic Research, Inc.
    20. Griffith, Rachel & O'Connell, Martin & Smith, Kate, 2020. "Price floors and externality correction," CEPR Discussion Papers 15476, C.E.P.R. Discussion Papers.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jhecon:v:66:y:2019:i:c:p:18-26. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/inca/505560 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505560 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.