Externalities, Border Trade and Illegal Production: An Optimal Tax Approach to Alcohol Policy
This paper deals with optimal income and commodity taxation in an economy, where alcohol is an externality-generating consumption good. In our model, alcohol can be bought domestically, imported (via border trade) or produced illegally. Border trade implies an incentive to set the domestic alcohol tax below the marginal social damage of alcohol, and to tax (subsidize) commodities which are complementary with (substitutable for) alcohol. In addition, since leisure and alcohol consumption are generally nonseparable, the income tax will also be used as a corrective instrument. On the other hand, the desire to reduce the illegal production may generally affect the optimal income and commodity taxes in either direction. One possible (and arguably realistic) outcome is, nevertheless, that the desire to avoid the illegal production works to reduce both the alcohol tax and the marginal income tax rate.
|Date of creation:||04 Apr 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
Web page: http://www.econ.umu.se/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Aronsson, Thomas & Sjögren, Tomas, 2002.
"Is the Optimal Labor Income Tax Progressive in a Unionized Economy?,"
Umeå Economic Studies
587, Umeå University, Department of Economics.
- Thomas Aronsson & Tomas Sjögren, 2004. "Is the Optimal Labor Income Tax Progressive in a Unionized Economy?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(4), pages 661-675, December.
- Helmuth Cremer & Firouz Gahvari & Norbert Ladoux, 2001. "Second-Best Pollution Taxes and the Structure of Preferences," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 258-280, October.
- Thomas Aronsson & Sören Blomquist, 2001.
"Optimal Taxation, Global Externalities and Labor Mobility,"
CESifo Working Paper Series
458, CESifo Group Munich.
- Aronsson, Thomas & Blomquist, Soren, 2003. "Optimal taxation, global externalities and labor mobility," Journal of Public Economics, Elsevier, vol. 87(12), pages 2749-2764, December.
- Aronsson, Thomas & Blomquist, Sören, 2000. "Optimal Taxation, Global Externalities and Labor Mobility," Umeå Economic Studies 544, Umeå University, Department of Economics.
- Aronsson, T. & Blomquist, S., 2000. "Optimal Taxation, Global Externalities and Labor Mobility," Papers 2000:15, Uppsala - Working Paper Series.
- Aronsson, T. & Blomquist, S., 2000. "Optimal Taxation, Global Externalities and Labor Mobility," Papers 2000-15, Uppsala - Working Paper Series.
- Aronsson, Thomas & Blomquist, Sören, 2000. "Optimal Taxation, Global Externalities and Labor Mobility," Working Paper Series 2000:15, Uppsala University, Department of Economics.
- Cremer, Helmuth & Gahvari, Firouz, 2001. "Second-best taxation of emissions and polluting goods," Journal of Public Economics, Elsevier, vol. 80(2), pages 169-197, May.
- Ian Crawford & Sarah Tanner, 1999. "Alcohol taxes, tax revenues and the Single European Market," Fiscal Studies, Institute for Fiscal Studies, vol. 20(3), pages 287-304, September.
- Ian Crawford & Sarah Tanner, 1995. "Bringing it all back home: alcohol taxation and cross-border shopping," Fiscal Studies, Institute for Fiscal Studies, vol. 16(2), pages 94-114, May.
- Christiansen, Vidar, 1984. "Which commodity taxes should supplement the income tax?," Journal of Public Economics, Elsevier, vol. 24(2), pages 195-220, July.
- Parry, Ian W H, 2003. "On the Costs of Excise Taxes and Income Taxes in the UK," International Tax and Public Finance, Springer, vol. 10(3), pages 281-304, May.
- Fuest, Clemens & Huber, Bernd, 1997.
"Wage bargaining, Labor-tax progression, and welfare,"
Munich Reprints in Economics
20302, University of Munich, Department of Economics.
- Clemens Fuest & Bernd Huber, 1997. "Wage bargaining, labor-tax progression, and welfare," Journal of Economics, Springer, vol. 66(2), pages 127-150, June.
- Larry G. Sgontz, 1993. "Optimal Taxation: the Mix of Alcohol and Other Taxes," Public Finance Review, , vol. 21(3), pages 260-275, July.
- Peter A. Diamond, 1973. "Consumption Externalities and Imperfect Corrective Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(2), pages 526-538, Autumn.
- 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 235-43, March.
When requesting a correction, please mention this item's handle: RePEc:hhs:umnees:0654. 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: (Kjell-Göran Holmberg)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.