One markup to rule them all: Taxation by liquor pricing regulation

Miravete Marin, Eugenio, Seim, Katja and Thurk, Jeff (2020) One markup to rule them all: Taxation by liquor pricing regulation. American Economic Journal: Microeconomics, 12 (1). pp. 1-41. ISSN 1945-7669

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Commodity taxation often involves uniform tax rates. We use alcohol laws that tax differentiated spirits with a comprehensive uniform markup to evaluate redistribution generated by such simple tax policy. We document preference heterogeneity among consumers, variation in product demand elasticities, and market power among producers with heterogeneous product portfolios. Relative to more flexible product-level markups recognizing demand heterogeneity and strategic price responses of firms, we find that the uniform markup underprices less elastic spirits, implicitly subsidizing low-income and less educated residents. The uniform markup grants additional market power to small specialized firms whose product positioning benefits from the policy.

Item Type: Article
Uncontrolled Keywords: taxation by regulation,optimal taxation,uniform commodity taxation,economics and econometrics ,/dk/atira/pure/subjectarea/asjc/2000/2002
Faculty \ School: Faculty of Social Sciences > School of Economics
UEA Research Groups: Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Faculty of Social Sciences > Research Groups > Industrial Economics
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Depositing User: LivePure Connector
Date Deposited: 10 Jan 2019 16:30
Last Modified: 12 May 2023 19:30
DOI: 10.1257/mic.20180155

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