Implicit Taxes Collected by State Liquor Monopolies
State monopolization or taxation are supposedly justified because of negative externalities from alcohol consumption, but recent research questions the efficacy of such policies, suggesting that their actual goals may be revenue-generation. Consideration of this hypothesis is facilitated by estimates of the implicit taxes charged in monopoly states, which generally are substantially higher than taxes in non-monopoly states. Evidence that monopolization and high taxes do not affect the level of externalities is also explained by adjustments that rational individuals make to avoid the consequences of such policies, thus providing further support for the revenue-maximization hypothesis. Copyright 2003 by Kluwer Academic Publishers
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