Optimal Sin Taxation and Market Power

• 成果类型: Article
• 署名作者: O'connell, Martin; Smith, Kate
• 署名单位: University of Wisconsin System; University of Wisconsin Madison; University of London; London School Economics & Political Science
• 刊物名称: AMERICAN ECONOMIC JOURNAL-APPLIED ECONOMICS
• ISSN/ISSBN: 1945-7782
• DOI: 10.1257/app.20220407
• 发表日期: 2024
• 页码: 34-70
• 关键词: sugar-sweetened beverages; vertical relationships; tax; retailers; product; prices; income; manufacturers; COMPETITION; inference

摘要

We study how market power impacts the efficiency and redistributive properties of sin taxation, with an empirical application to sugar-sweetened beverage taxation. We estimate an equilibrium model of the UK drinks market, which we embed in a tax design framework to solve for optimal sugar-sweetened beverage tax policy. Positive price-cost margins for drinks create inefficiencies that lower the optimal rate compared with a perfectly competitive setting. Since profits mainly accrue to the rich, this is partially mitigated under social preferences for equity. Overall, ignoring market power when setting tax policy leads to welfare gains 40 percent below those at the optimum.