Work detail

Optimal Tax Modeling - The Case of Alcohol

Author: Mgr. Mikolášek Jakub
Year: 2009 - winter
Leaders: prof. Ing. Karel Janda M.A., Dr., Ph.D.
Consultants:
Work type: Doctoral
Language: English
Pages: 112
Awards and prizes:
Link:
Abstract: This project focuses on modeling the optimal alcohol tax for the Czech
Republic, based on microeconomic findings on consumer’s behavior. After stating
the key statistical facts on alcohol consumption in the Czech Republic, problems of
abusive alcohol consumption are identified and an estimate of costs arising from its
consumption is calculated. From these costs we identify that part, which is external
to the alcohol abuser (e.g. which affects the other members of society). Using the
methodology by Anderson and Baumberg (2006), together with macroeconomic data
on local alcohol production, we estimate the net external costs of alcohol
consumption. The next step focuses on theoretical modeling of optimal alcohol tax
for various alcoholic beverages, using an analogy to a method developed by Pogue
and Sgotz (1989) and Saffer and Chaplupka (1994). Analyzing several scenarios, we
get an insight view to the problem and we state the requirements on empirical data
necessary for numerical calculation of optimal tax. Therefore in the next part, we
analyze microeconomic behavior of alcohol consumers in the Czech Republic and
estimate demand elasticities using AIDS (Almost Ideal Demand System) estimate on
data from Household Budget Statistics by Czech Statistical Office. Then, using the
results of microeconomic analysis we compare tax induced reduction in external
abuse costs to the dead weigh loss to the consumer’s surplus. Taking various
assumptions on “social optimality” and consumer behavior and given the elasticities
of demand for alcohol, we will create various scenarios for modeling socially optimal
taxation.
Downloadable: Rigorosus thesis

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