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Sin Taxes: Do Heterogeneous Responses Undercut Their Value? / Padmaja Ayyagari, Partha Deb, Jason Fletcher, William T. Gallo, Jody L. Sindelar.
- Format:
- Book
- Author/Creator:
- Ayyagari, Padmaja.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w15124.
- NBER working paper series no. w15124
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Sin Taxes
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2009.
- Summary:
- 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.
- Notes:
- Print version record
- July 2009.
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