The Political Economy of Sin Taxes

Markus Haavio and Kaisa Kotakorpi

No 2650, CESifo Working Paper Series from CESifo

Abstract: We analyse the determination of taxes on harmful goods when consumers have self-control problems. We show that under reasonable assumptions, the socially optimal corrective tax exceeds the average distortion caused by self-control problems. Further, we analyse how individuals with self-control problems would vote on taxes on the consumption of harmful goods, and show that the equilibrium tax is typically below the socially optimal level. When the redistributive effects of sin taxes are taken into account, the difference between the social optimum and equilibrium is small at low levels of harm, but becomes more pronounced when consumption is more harmful.

Keywords: excise taxation; voting; self-control (search for similar items in EconPapers)
JEL-codes: D72 H21 H30 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The political economy of sin taxes (2011)
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