The Political Economy of Sin Taxes

Markus Haavio and Kaisa Kotakorpi
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Kaisa Kotakorpi: School of Management, University of Tampere

No 760, Working Papers from Tampere University, Faculty of Management and Business, Economics

Abstract: We analyse the determination of taxes on harmful goods when consumers have self-control problems. We show that under mild conditions, the socially optimal tax rate exceeds the average distortion caused by self-control problems. Further, we show that in most cases the tax rate chosen in political equilibrium is below the socially optimal level.

Keywords: excise taxation; voting; self-control (search for similar items in EconPapers)
JEL-codes: D72 H21 H30 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2007-10
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Citations: View citations in EconPapers (2)

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http://urn.fi/urn:isbn:978-951-44-7129-2 First version, 2007 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:tam:wpaper:0760

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