Sin Taxes: Do Heterogeneous Responses Undercut Their Value?
This paper estimates the price elasticity of demand for alcohol using Health and Retirement Survey data. To account for unobserved heterogeneity in price responsiveness, we use finite mixture models. We recover two latent groups, one is significantly responsive to price but the other is unresponsive. Differences between these two groups can be explained in part by the behavioral factors of risk aversion, financial planning horizon, forward looking and locus of control. These results have policy implications. Only a subgroup responds significantly to price. Importantly, the unresponsive group drinks more heavily, suggesting that a higher price could fail to curb drinking by those most likely to cause negative externalities. In contrast, those least likely to impose costs on others are more responsive, thus suffering greater deadweight loss yet with less prevention of negative externalities.
|Date of creation:||Jul 2009|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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.:
- Morduch, Jonathan J. & Stern, Hal S., 1997.
"Using mixture models to detect sex bias in health outcomes in Bangladesh,"
Journal of Econometrics,
Elsevier, vol. 77(1), pages 259-276, March.
- Jonathan J. Morduch & Hall S. Stern, 1995. "Using Mixture Models to Detect Sex Bias in Health Outcomes in Bangladesh," Harvard Institute of Economic Research Working Papers 1728, Harvard - Institute of Economic Research.
- Morduch, J. & Stern, H.S., 1995. "Using Mixture Models to Detect Sex Bias in Health Outcomes in Bangladesh," Papers 513, Harvard - Institute for International Development.
- Wang, Peiming & Cockburn, Iain M & Puterman, Martin L, 1998. "Analysis of Patent Data--A Mixed-Poisson-Regression-Model Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(1), pages 27-41, January.
- Donald S. Kenkel, 2005. "Are Alcohol Tax Hikes Fully Passed Through to Prices? Evidence from Alaska," American Economic Review, American Economic Association, vol. 95(2), pages 273-277, May.
- Michael T. French & Johanna C. Maclean, 2006. "Underage alcohol use, delinquency, and criminal activity," Health Economics, John Wiley & Sons, Ltd., vol. 15(12), pages 1261-1281.
- Joni Hersch, 2005. "Smoking Restrictions as a Self-Control Mechanism," Journal of Risk and Uncertainty, Springer, vol. 31(1), pages 5-21, July.
- F. Thomas Juster & Richard Suzman, 1995. " An Overview of the Health and Retirement Study," Journal of Human Resources, University of Wisconsin Press, vol. 30, pages s7-s56.
- Henry Saffer & Dhaval Dave, 2005. "Mental Illness and the Demand for Alcohol, Cocaine, and Cigarettes," Economic Inquiry, Western Economic Association International, vol. 43(2), pages 229-246, April.
- Henry Saffer & Dhaval Dave, 2002. "Mental Illness and the Demand for Alcohol, Cocaine and Cigarettes," NBER Working Papers 8699, National Bureau of Economic Research, Inc.
- Grossman, Michael & Chaloupka, Frank J & Sirtalan, Ismail, 1998. "An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 39-48, January.
- Michael Grossman & Frank J. Chaloupka & Ismail Sirtalan, 1995. "An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels," NBER Working Papers 5200, National Bureau of Economic Research, Inc.
- Young, Douglas J & Bieli´nska-Kwapisz, Agnieszka, 2002. "Alcohol Taxes and Beverage Prices," National Tax Journal, National Tax Association, vol. 55(1), pages 57-73, March.
- Young, Douglas J & Bieli´nska-Kwapisz, Agnieszka, 2002. "Alcohol Taxes and Beverage Prices," National Tax Journal, National Tax Association, vol. 55(N. 1), pages 57-73, March.
- Dhaval Dave & Henry Saffer, 2007. "Risk Tolerance and Alcohol Demand Among Adults and Older Adults," NBER Working Papers 13482, National Bureau of Economic Research, Inc.
- Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 537-579.
- Wedel, M, et al, 1993. "A Latent Class Poisson Regression Model for Heterogeneous Count Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 397-411, Oct.-Dec..
- Conway, Karen Smith & Deb, Partha, 2005. "Is prenatal care really ineffective? Or, is the 'devil' in the distribution?," Journal of Health Economics, Elsevier, vol. 24(3), pages 489-513, May.
- Partha Deb & Karen Smith Conway, 2002. "Is Prenatal Care Really Ineffective? Or, is the 'Devil' in the Distribution?," Economics Working Paper Archive at Hunter College 02/2, Hunter College Department of Economics.
- Frank J. Chaloupka & Henry Wechsler, 1996. "Binge Drinking In College: The Impact Of Price, Availability, And Alcohol Control Policies," Contemporary Economic Policy, Western Economic Association International, vol. 14(4), pages 112-124, October.
- Jonathan Gruber & Botond Koszegi, 2000. "Is Addiction "Rational"? Theory and Evidence," NBER Working Papers 7507, National Bureau of Economic Research, Inc.
- Gruber Jonathan H & Mullainathan Sendhil, 2005. "Do Cigarette Taxes Make Smokers Happier," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-45, July.
- Jonathan Gruber & Sendhil Mullainathan, 2002. "Do Cigarette Taxes Make Smokers Happier?," NBER Working Papers 8872, National Bureau of Economic Research, Inc.
- Manning, Willard G. & Blumberg, Linda & Moulton, Lawrence H., 1995. "The demand for alcohol: The differential response to price," Journal of Health Economics, Elsevier, vol. 14(2), pages 123-148, June. Full references (including those not matched with items on IDEAS)