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Title:The political economy of sin taxes PDF Logo
Authors:Haavio, Markus
Kotakorpi, Kaisa Ilona
Issue Date:2009
Series/Report no.:CESifo working paper 2650
Abstract:We analyse the determination of taxes on harmful goods when consumers have self-control problems. We show that under reasonable assumptions, the socially optimal corrective tax exceeds the average distortion caused by self-control problems. Further, we analyse how individuals with self-control problems would vote on taxes on the consumption of harmful goods, and show that the equilibrium tax is typically below the socially optimal level. When the redistributive effects of sin taxes are taken into account, the difference between the social optimum and equilibrium is small at low levels of harm, but becomes more pronounced when consumption is more harmful.
Subjects:excise taxation
voting
self-control
JEL:H21
H30
D72
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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