Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/200288
Authors: 
Griffith, Rachel
O'Connell, Martin
Smith, Kate
Year of Publication: 
2017
Series/Report no.: 
IFS Working Papers No. W17/28
Abstract: 
We study optimal corrective taxation in the alcohol market. Consumption generates negative externalities that are non-linear in the total amount of alcohol consumed. If tastes for products are heterogeneous and correlated with marginal externalities, then varying tax rates on different products can lead to welfare gains. We study this problem in an optimal tax framework and empirically for the UK alcohol market. Welfare gains from optimally varying rates are higher the more concentrated externalities are amongst heavy drinkers. A sufficient statistics approach is informative about the direction of reform, but not about optimal rates when externalities are highly concentrated.
Subjects: 
externality
corrective taxes
alcohol
JEL: 
D12
D62
H21
H23
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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