*Associate Professor, Department of Consumer Economics and Housing, Cornell University. Financial support through a FIRST award from the National Institute on Alcohol Abuse and Alcoholism, grant number 1R29AA0S350-01AI is gratefully acknowledged. I would also like to thank the editor and referees of this journal, participants at workshops at Penn State, the University of Chicago, and the University of Illinois-Chicago, and participants at a session of the Eastern Economics Association for helpful comments.
NEW ESTIMATES OF THE OPTIMAL TAX ON ALCOHOL
Article first published online: 28 SEP 2007
Volume 34, Issue 2, pages 296–319, April 1996
How to Cite
Kenkel, D. S. (1996), NEW ESTIMATES OF THE OPTIMAL TAX ON ALCOHOL. Economic Inquiry, 34: 296–319. doi: 10.1111/j.1465-7295.1996.tb01379.x
- Issue published online: 28 SEP 2007
- Article first published online: 28 SEP 2007
In this paper I use a new data set to estimate the optimal alcohol tax rate. As a benchmark, the empirical results imply that the optimal tax rate is over 100 percent of the net-of-tax price. However, alcohol taxation is a second-best solution to the problems associated with alcohol abuse. I conclude that the optimal alcohol tax rate would be much lower if punishment for drunk driving were more certain and severe. Government provision of information about the health consequences of heavy drinking would also remove part of the efficiency rationale for alcohol taxes.