Special Taxation of Alcoholic Beverages to Correct Market Failures*

Economic Papers

Volumn 29, Issue 2, 2010, Pages 200-214

  Freebairn, John ^a  

^a UNIVERSITY OF MELBOURNE   (Australia)

Author keywords

alcohol taxation; D62; external costs; H23

Indexed keywords

EID: 84055196170     PISSN: 08120439     EISSN: 17593441     Source Type: Journal    
DOI: 10.1111/j.1759-3441.2010.00063.x     Document Type: Article

References (35)

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24. A commonly stated rationale for the WET rebate is to support wine cellar door sales as a part of a regional development strategy. But, there is no rationale to support wine sales but not other regional activities such as food purveyors and other regional tourist operators
25. In the appropriate long-run context, a 100 per cent pass forward assumption is used by Australian Bureau of Statistics (ABS) in its analyses of the distribution of the tax burden (ABS,2007) and by Warrenet al.(2005). For beer and wine, the underlying logic is constant returns to scale-production technology and mark-up on marginal cost pricing associated with a number of oligopoly models. In the case of wine, one plausible model is a competitive or monopolistic competitive model and a highly elastic export demand function
26. Other forms of government intervention that directly and indirectly influence market outcomes from the supply side of the market for alcohol, including various forms of assistance to the agricultural sector, regulations and standards on the production of alcohol products, and anti-monopoly monitoring and intervention of businesses along the supply chain, can be important, but they are not considered here
27. Many argue that moderate consumption of alcohol (one to two standard drinks a day) provides benefits, such as higher life expectancy and less psychological stress, and that some of these benefits are external benefits. These potential external benefits are not considered in this study, but it is recognised that they would reduce the overall tax burden that maximises social welfare
28. Low risk was defined as up to twenty-eight standard drinks per week for a male and up to fourteen standard drinks per week for a female, high risk more than forty-three standard drinks a week for a male and twenty-nine or more for a female, with risky between these extremes. A standard drink contains ten grams of alcohol
29. Although CollinsandLapsley(2008) state these costs are borne by employers, employees directly and explicitly lose from earlier retirement and higher unemployment. There are a number of studies (for example, Barrett,2002 and HirschbergandLye,2004) showing an inverted U relationship between wage rates and alcohol consumption, which is consistent with the argument that excessive consumption results in lower promotion and wage rates
30. The same issues occur also in estimating the external costs of consumption of tobacco, illegal drugs and excess food consumption leading to obesity
31. CollinsandLapsley(2008) indicate that there is some double counting of health costs and road accident costs in their estimates
32. In the more realistic world trade model context, strictly speaking, the supply curve facing Australian consumers in both Figures 2and3 is the excess supply curve equal to the Australian supply-less exports and plus imports rather than the Australian supply curve. Free trade makes this excess supply curve more elastic than the Australian supply curve. This move to greater reality does not affect the reasoning and direction of effects of the results reported
33. The reduced form, Equation 1, would be derived from a structural model including a production function for the external cost activities and MEC per activity
34. Binge drinking is defined as males consuming seven or more standard drinks (of ten grams of alcohol by volume) on any one day, and five or more for females
35. PogueandSgontz(1989) derive explicit formula from a formal model