Estimated Effects of Different Alcohol Taxation and Price Policies on Health Inequalities: A Mathematical Modelling Study

Introduction

While evidence that alcohol pricing policies reduce alcohol-related health harm is robust, and alcohol taxation increases are a WHO “best buy” intervention, there is a lack of research comparing the scale and distribution across society of health impacts arising from alternative tax and price policy options. The aim of this study is to test whether four common alcohol taxation and pricing strategies differ in their impact on health inequalities.

Methods and Findings

An econometric epidemiological model was built with England 2014/2015 as the setting. Four pricing strategies implemented on top of the current tax were equalised to give the same 4.3% population-wide reduction in total alcohol-related mortality: current tax increase, a 13.4% all-product duty increase under the current UK system; a value-based tax, a 4.0% ad valorem tax based on product price; a strength-based tax, a volumetric tax of £0.22 per UK alcohol unit (= 8 g of ethanol); and minimum unit pricing, a minimum price threshold of £0.50 per unit, below which alcohol cannot be sold. Model inputs were calculated by combining data from representative household surveys on alcohol purchasing and consumption, administrative and healthcare data on 43 alcohol-attributable diseases, and published price elasticities and relative risk functions. Outcomes were annual per capita consumption, consumer spending, and alcohol-related deaths. Uncertainty was assessed via partial probabilistic sensitivity analysis (PSA) and scenario analysis.The pricing strategies differ as to how effects are distributed across the population, and, from a public health perspective, heavy drinkers in routine/manual occupations are a key group as they are at greatest risk of health harm from their drinking. Strength-based taxation and minimum unit pricing would have greater effects on mortality among drinkers in routine/manual occupations (particularly for heavy drinkers, where the estimated policy effects on mortality rates are as follows: current tax increase, −3.2%; value-based tax, −2.9%; strength-based tax, −6.1%; minimum unit pricing, −7.8%) and lesser impacts among drinkers in professional/managerial occupations (for heavy drinkers: current tax increase, −1.3%; value-based tax, −1.4%; strength-based tax, +0.2%; minimum unit pricing, +0.8%). Results from the PSA give slightly greater mean effects for both the routine/manual (current tax increase, −3.6% [95% uncertainty interval (UI) −6.1%, −0.6%]; value-based tax, −3.3% [UI −5.1%, −1.7%]; strength-based tax, −7.5% [UI −13.7%, −3.9%]; minimum unit pricing, −10.3% [UI −10.3%, −7.0%]) and professional/managerial occupation groups (current tax increase, −1.8% [UI −4.7%, +1.6%]; value-based tax, −1.9% [UI −3.6%, +0.4%]; strength-based tax, −0.8% [UI −6.9%, +4.0%]; minimum unit pricing, −0.7% [UI −5.6%, +3.6%]). Impacts of price changes on moderate drinkers were small regardless of income or socioeconomic group. Analysis of uncertainty shows that the relative effectiveness of the four policies is fairly stable, although uncertainty in the absolute scale of effects exists. Volumetric taxation and minimum unit pricing consistently outperform increasing the current tax or adding an ad valorem tax in terms of reducing mortality among the heaviest drinkers and reducing alcohol-related health inequalities (e.g., in the routine/manual occupation group, volumetric taxation reduces deaths more than increasing the current tax in 26 out of 30 probabilistic runs, minimum unit pricing reduces deaths more than volumetric tax in 21 out of 30 runs, and minimum unit pricing reduces deaths more than increasing the current tax in 30 out of 30 runs). Study limitations include reducing model complexity by not considering a largely ineffective ban on below-tax alcohol sales, special duty rates covering only small shares of the market, and the impact of tax fraud or retailer non-compliance with minimum unit prices.

Conclusions

Our model estimates that, compared to tax increases under the current system or introducing taxation based on product value, alcohol-content-based taxation or minimum unit pricing would lead to larger reductions in health inequalities across income groups. We also estimate that alcohol-content-based taxation and minimum unit pricing would have the largest impact on harmful drinking, with minimal effects on those drinking in moderation.     

Taxes and the tobacco wars

In this issue (see pages 187 to 191) Dr. Vivian H. Hamilton and associates demonstrate that tax reductions introduced in 5 Canadian provinces in 1994 slowed the rate of decline in cigarette consumption in those jurisdictions. Although both reductions and increases in taxation have been shown to influence tobacco consumption, changes in smoking habits must also be understood in the context of battles being waged on other fronts in the tobacco wars. In addition, more finely detailed analyses are needed to determine the impact of taxation and other factors on the smoking habits of specific subgroups of the population, particularly teenagers.     

The Impact of Taxation Reduction on Smoking in Youth between 1990 and 1999: Results from a Reconstructed Cohort Analysis of the Canadian Community Health Surveys

Background

Increases in taxation can contribute to smoking control. In the early 1990’s, tobacco smuggling rates in Canada increased dramatically. Governments responded with a substantial reduction in taxes on tobacco products. This study examines the impact of these tax changes on smoking in youth in Canada.

Methods

Data on smoking from three consecutive cycles of the Canadian Community Health Surveys were combined and analyzed using a reconstructed cohort approach. Age, sex and calendar year specific rates of smoking experimentation and the onset of daily smoking were estimated for youth. Estimates apply to the entire Canadian population.

Results

There was a strong increase in smoking in youth in the years following the reduction in tobacco taxes. The increase was stronger in women. The rates returned to pre-1990 rates by about 2002. The number of excess daily smokers for people born between 1977 and 1985 that can be linked to the taxation reduction is about 190,000.

Interpretation

There is strong evidence that reduction of tobacco taxes to combat smuggling had an adverse impact on smoking rates in youth.     

Curbing adolescent smoking: a review of the effectiveness of various policies

Tobacco-related mortality is one of the biggest killers in American medicine. Evidence suggests that if adolescents can be kept tobacco-free, most will never start using tobacco. Therefore, tobacco control policies directed at the youth population could provide an effective method for sustaining long-term reductions in smoking in all segments of the population. Many forms of tobacco control policies have been implemented including restrictive laws, public campaigns, and taxation duties; there has been disagreement over which is most effective. We investigate the efficacy of various methods of tobacco control in youth and present a review of the published evidence. Econometric data for both youth access restrictions and environmental tobacco smoke restrictions afford ambiguous results. Results vary in a continuum from a moderate negative effect toward, ironically, a marginal positive effect on smoking. While information dissemination policies may be somewhat effective on the onset, they are limited in their effect and eventually diminish over time. We conclude that increases in price affect teen smoking to a great degree. Most estimates show that for a 10 percent increase in prices, which could be implemented by a tax per pack, a 15 percent decrease in cigarettes consumed could be accomplished. Taxation policies are an effective means of preventative medicine.     

Effect of smoke-free workplaces on smoking behaviour: systematic review

ObjectiveTo quantify the effects of smoke-free workplaces on smoking in employees and compare these effects to those achieved through tax increases.DesignSystematic review with a random effects meta-analysis.SettingWorkplaces in the United States, Australia, Canada, and Germany.ParticipantsEmployees in unrestricted and totally smoke-free workplaces.ResultsTotally smoke-free workplaces are associated with reductions in prevalence of smoking of 3.8% (95% confidence interval 2.8% to 4.7%) and 3.1 (2.4 to 3.8) fewer cigarettes smoked per day per continuing smoker. Combination of the effects of reduced prevalence and lower consumption per continuing smoker yields a mean reduction of 1.3 cigarettes per day per employee, which corresponds to a relative reduction of 29%. To achieve similar reductions the tax on a pack of cigarettes would have to increase from $0.76 to $3.05 (€0.78 to €3.14) in the United States and from £3.44 to £6.59 (€5.32 to €10.20) in the United Kingdom. If all workplaces became smoke-free, consumption per capita in the entire population would drop by 4.5% in the United States and 7.6% in the United Kingdom, costing the tobacco industry $1.7 billion and £310 million annually in lost sales. To achieve similar reductions tax per pack would have to increase to $1.11 and £4.26.ConclusionsSmoke-free workplaces not only protect non-smokers from the dangers of passive smoking, they also encourage smokers to quit or to reduce consumption.

What is already known on this topic

Smoke-free workplaces are associated with lower cigarette consumption per continuing smoker

What this study adds

Smoke-free workplaces reduce prevalence of smoking as well as consumptionThe combined effects of people stopping smoking and reducing consumption reduces total cigarette consumption by 29%To achieve similar results through taxation would require cigarette taxes per pack to increase from $0.76 to $3.05 in the United States and from £3.44 to £6.59 in the United Kingdom     

A cost–benefit analysis of the environmental taxation policy in China: A frontier analysis‐based environmentally extended input–output optimization method

China's high‐speed economic development and reliance on overconsumption of natural resources have led to serious environmental pollution. Environmental taxation is seen as an effective economic tool to help mitigate air pollution. In order to assess the effects of different scenarios of environmental taxation policies, we propose a frontier‐based environmentally extended input–output optimization model with explicit emission abatement sectors to reflect the inputs and benefits of abatement. Frontier analysis ensures policy scenarios are assessed under the same technical efficiency benchmark, while input–output analysis depicts the wide range of economic transactions among sectors of an economy. Four scenarios are considered in this study, which are increasing specific tax rates of SO₂, NO_x, and soot and dust separately and increasing all three tax rates simultaneously. Our estimation results show that: raising tax rates of SO₂, NO_x, and soot and dust simultaneously would have the highest emission reduction effects, with the SO₂ tax rate making the greatest contribution to emission reduction. Raising the soot and dust tax rate is the most environmentally friendly strategy due to its highest abatement to welfare through avoided health costs. The combination of frontier analysis and input–output analysis provides policy makers a comprehensive and sectoral approach to assess costs and benefits of environmental taxation.     

Reducing tobacco consumption: public policy alternatives for Canada.

The costs of smoking are extensive, not only in fiscal terms but also in terms of human suffering. A review of several major public policies reveals that concerted efforts by all levels of government and by the public can have an effect on the rate of consumption of tobacco. Specifically, increases in price through taxation, anti-smoking messages, restrictions on smoking behaviour and increased public pressure are effective in reducing smoking. Serious joint efforts in the area of public policy should be pursued to control the effects of this hazardous practice in Canada.     

Tobacco Industry Manipulation of Tobacco Excise and Tobacco Advertising Policies in the Czech Republic: An Analysis of Tobacco Industry Documents

Background

The Czech Republic has one of the poorest tobacco control records in Europe. This paper examines transnational tobacco companies'' (TTCs'') efforts to influence policy there, paying particular attention to excise policies, as high taxes are one of the most effective means of reducing tobacco consumption, and tax structures are an important aspect of TTC competitiveness.

Methods and Findings

TTC documents dating from 1989 to 2004/5 were retrieved from the Legacy Tobacco Documents Library website, analysed using a socio-historical approach, and triangulated with key informant interviews and secondary data. The documents demonstrate significant industry influence over tobacco control policy. Philip Morris (PM) ignored, overturned, and weakened various attempts to restrict tobacco advertising, promoting voluntary approaches as an alternative to binding legislation. PM and British American Tobacco (BAT) lobbied separately on tobacco tax structures, each seeking to implement the structure that benefitted its own brand portfolio over that of its competitors, and enjoying success in turn. On excise levels, the different companies took a far more collaborative approach, seeking to keep tobacco taxes low and specifically to prevent any large tax increases. Collective lobbying, using a variety of arguments, was successful in delaying the tax increases required via European Union accession. Contrary to industry arguments, data show that cigarettes became more affordable post-accession and that TTCs have taken advantage of low excise duties by raising prices. Interview data suggest that TTCs enjoy high-level political support and continue to actively attempt to influence policy.

Conclusion

There is clear evidence of past and ongoing TTC influence over tobacco advertising and excise policy. We conclude that this helps explain the country''s weak tobacco control record. The findings suggest there is significant scope for tobacco tax increases in the Czech Republic and that large (rather than small, incremental) increases are most effective in reducing smoking. Please see later in the article for the Editors'' Summary     

Smuggling and cross border shopping of tobacco in Europe.

Governments have recently become concerned about cross border shopping and smuggling because it can decrease tax revenue. The tobacco industry predicted that, with the removal of border controls in the European Union, price differences between neighbouring countries would lead to a diversion of tobacco trade, legally and illegally, to countries with cheaper cigarettes. According to them this diversion would be through increased cross border shopping for personal consumption or through increased smuggling of cheap cigarettes from countries with low tax to countries with high tax, where cigarettes are more expensive. These arguments have been used to urge governments not to increase tax on tobacco products. The evidence suggests, however, that cross border shopping is not yet a problem in Europe and that smuggling is not of cheap cigarettes to expensive countries. Instead, more expensive "international" brands are smuggled into northern Europe and sold illegally on the streets of the cheaper countries of southern Europe.     

Health,Health Inequality,and Cost Impacts of Annual Increases in Tobacco Tax: Multistate Life Table Modeling in New Zealand

BackgroundCountries are increasingly considering how to reduce or even end tobacco consumption, and raising tobacco taxes is a potential strategy to achieve these goals. We estimated the impacts on health, health inequalities, and health system costs of ongoing tobacco tax increases (10% annually from 2011 to 2031, compared to no tax increases from 2011 [“business as usual,” BAU]), in a country (New Zealand) with large ethnic inequalities in smoking-related and noncommunicable disease (NCD) burden.ConclusionsOngoing tobacco tax increases deliver sizeable health gains and health sector cost savings and are likely to reduce health inequalities. However, if policy makers are to achieve more rapid reductions in the NCD burden and health inequalities, they will also need to complement tobacco tax increases with additional tobacco control interventions focused on cessation.     

The Effect of Tobacco Control Measures during a Period of Rising Cardiovascular Disease Risk in India: A Mathematical Model of Myocardial Infarction and Stroke

Background

We simulated tobacco control and pharmacological strategies for preventing cardiovascular deaths in India, the country that is expected to experience more cardiovascular deaths than any other over the next decade.

Methods and Findings

A microsimulation model was developed to quantify the differential effects of various tobacco control measures and pharmacological therapies on myocardial infarction and stroke deaths stratified by age, gender, and urban/rural status for 2013 to 2022. The model incorporated population-representative data from India on multiple risk factors that affect myocardial infarction and stroke mortality, including hypertension, hyperlipidemia, diabetes, coronary heart disease, and cerebrovascular disease. We also included data from India on cigarette smoking, bidi smoking, chewing tobacco, and secondhand smoke. According to the model''s results, smoke-free legislation and tobacco taxation would likely be the most effective strategy among a menu of tobacco control strategies (including, as well, brief cessation advice by health care providers, mass media campaigns, and an advertising ban) for reducing myocardial infarction and stroke deaths over the next decade, while cessation advice would be expected to be the least effective strategy at the population level. In combination, these tobacco control interventions could avert 25% of myocardial infarctions and strokes (95% CI: 17%–34%) if the effects of the interventions are additive. These effects are substantially larger than would be achieved through aspirin, antihypertensive, and statin therapy under most scenarios, because of limited treatment access and adherence; nevertheless, the impacts of tobacco control policies and pharmacological interventions appear to be markedly synergistic, averting up to one-third of deaths from myocardial infarction and stroke among 20- to 79-y-olds over the next 10 y. Pharmacological therapies could also be considerably more potent with further health system improvements.

Conclusions

Smoke-free laws and substantially increased tobacco taxation appear to be markedly potent population measures to avert future cardiovascular deaths in India. Despite the rise in co-morbid cardiovascular disease risk factors like hyperlipidemia and hypertension in low- and middle-income countries, tobacco control is likely to remain a highly effective strategy to reduce cardiovascular deaths. Please see later in the article for the Editors'' Summary     

Why Have Tobacco Control Policies Stalled? Using Genetic Moderation to Examine Policy Impacts

Background

Research has shown that tobacco control policies have helped produce the dramatic decline in use over the decades following the 1964 surgeon general’s report. However, prevalence rates have stagnated during the past two decades in the US, even with large tobacco taxes and expansions of clean air laws. The observed differences in tobacco control policy effectiveness and why policies do not help all smokers are largely unexplained.

Objective

The aim of this study was to determine the importance of genetics in explaining response to tobacco taxation policy by testing the potential of gene-policy interaction in determining adult tobacco use.

Methods

A moderated regression analysis framework was used to test interactive effects between genotype and tobacco policy in predicting tobacco use. Cross sectional data of US adults from the National Health and Nutrition Examination Survey (NHANES) linked with genotype and geocodes were used to identify tobacco use phenotypes, state-level taxation rates, and variation in the nicotinic acetylcholine receptor (CHRNA6) genotype. Tobacco use phenotypes included current use, number of cigarettes smoked per day, and blood serum cotinine measurements.

Results

Variation in the nicotinic acetylcholine receptor was found to moderate the influence of tobacco taxation on multiple measures of tobacco use. Individuals with the protective G/G polymorphism (51% of the sample) responded to taxation while others had no response. The estimated differences in response by genotype were C/C genotype: b = −0.016 se  = 0.018; G/C genotype: b = 0.014 se  = 0.017; G/G genotype: b = −0.071 se 0.029.

Conclusions

This study provides novel evidence of “gene-policy” interaction and suggests a genetic mechanism for the large differences in response to tobacco policies. The inability for these policies to reduce use for individuals with specific genotypes suggests alternative methods may be needed to further reduce use.     

The Dynamics of Wealth Inequality and the Effect of Income Distribution

The rapid increase of wealth inequality in the past few decades is one of the most disturbing social and economic issues of our time. Studying its origin and underlying mechanisms is essential for policy aiming to control and even reverse this trend. In that context, controlling the distribution of income, using income tax or other macroeconomic policy instruments, is generally perceived as effective for regulating the wealth distribution. We provide a theoretical tool, based on the realistic modeling of wealth inequality dynamics, to describe the effects of personal savings and income distribution on wealth inequality. Our theoretical approach incorporates coupled equations, solved using iterated maps to model the dynamics of wealth and income inequality. Notably, using the appropriate historical parameter values we were able to capture the historical dynamics of wealth inequality in the United States during the course of the 20th century. It is found that the effect of personal savings on wealth inequality is substantial, and its major decrease in the past 30 years can be associated with the current wealth inequality surge. In addition, the effect of increasing income tax, though naturally contributing to lowering income inequality, might contribute to a mild increase in wealth inequality and vice versa. Plausible changes in income tax are found to have an insignificant effect on wealth inequality, in practice. In addition, controlling the income inequality, by progressive taxation, for example, is found to have a very small effect on wealth inequality in the short run. The results imply, therefore, that controlling income inequality is an impractical tool for regulating wealth inequality.     

All Africa conference on tobacco control.

Although the health hazards of smoking are now generally accepted in most Western countries, the arguments have not had much impact on poorer nations. A conference on tobacco control held in Harare, Zimbabwe, in November last year was the largest to tackle this problem. The conference heard how threats of epidemics of tobacco related disease in the distant future held little weight with governments of countries that often already had massive public health problems. More immediate effects needed to be emphasised. Speakers gave three cogent arguments; firstly, the loss of capacity for foreign trade in essential goods, since most African countries are net importers of tobacco; secondly, the extensive deforestation which is occurring to fuel the flue curing of tobacco; thirdly, evidence from Papua New Guinea that raising taxation on tobacco provides governments with increased income for many years before a decrease begins.     

Tobacco cigarette smoking exacerbates aortic calcification in an early stage of myocardial infarction in a female mouse model

Despite increased social awareness, marketing restraints, tobacco taxation, and available smoking cessation rehab programs, active and passive smoking remain a worldwide challenging epidemic and a key risk factor for cardiovascular diseases development. Although cardiovascular (CV) protection is more pronounced in women than in men due to estrogenic effects, tobacco cigarette smoking exposure seems to alter this protection by modulating estrogen actions via undefined mechanisms. Premenopausal cigarette smoking women are at higher risk of adverse CV effects than non-smokers. In this study, we investigated the impact of cigarette smoking on early CV injury after myocardial infarction (MI) in non-menopausal female mice. Aortic arch calcification, fibrosis, reactive oxygen species, and gene expression of inflammatory and calcification genes were exaggerated in mice exposed to cigarette smoke (CS). These findings suggest that aortic injury following MI, characterized by vascular smooth muscle cells transdifferentiation, calcification, inflammation, and collagen deposition but not cardiac dysfunction is exacerbated with CS exposure. The novel findings of this study highlight the importance of aortic injury on short and long-term prognosis in CS-exposed MI females. Linking those findings to estrogen alteration is probable and entails investigation.     

Averting Obesity and Type 2 Diabetes in India through Sugar-Sweetened Beverage Taxation: An Economic-Epidemiologic Modeling Study

Background

Taxing sugar-sweetened beverages (SSBs) has been proposed in high-income countries to reduce obesity and type 2 diabetes. We sought to estimate the potential health effects of such a fiscal strategy in the middle-income country of India, where there is heterogeneity in SSB consumption, patterns of substitution between SSBs and other beverages after tax increases, and vast differences in chronic disease risk within the population.

Methods and Findings

Using consumption and price variations data from a nationally representative survey of 100,855 Indian households, we first calculated how changes in SSB price alter per capita consumption of SSBs and substitution with other beverages. We then incorporated SSB sales trends, body mass index (BMI), and diabetes incidence data stratified by age, sex, income, and urban/rural residence into a validated microsimulation of caloric consumption, glycemic load, overweight/obesity prevalence, and type 2 diabetes incidence among Indian subpopulations facing a 20% SSB excise tax. The 20% SSB tax was anticipated to reduce overweight and obesity prevalence by 3.0% (95% CI 1.6%–5.9%) and type 2 diabetes incidence by 1.6% (95% CI 1.2%–1.9%) among various Indian subpopulations over the period 2014–2023, if SSB consumption continued to increase linearly in accordance with secular trends. However, acceleration in SSB consumption trends consistent with industry marketing models would be expected to increase the impact efficacy of taxation, averting 4.2% of prevalent overweight/obesity (95% CI 2.5–10.0%) and 2.5% (95% CI 1.0–2.8%) of incident type 2 diabetes from 2014–2023. Given current consumption and BMI distributions, our results suggest the largest relative effect would be expected among young rural men, refuting our a priori hypothesis that urban populations would be isolated beneficiaries of SSB taxation. Key limitations of this estimation approach include the assumption that consumer expenditure behavior from prior years, captured in price elasticities, will reflect future behavior among consumers, and potential underreporting of consumption in dietary recall data used to inform our calculations.

Conclusion

Sustained SSB taxation at a high tax rate could mitigate rising obesity and type 2 diabetes in India among both urban and rural subpopulations. Please see later in the article for the Editors'' Summary     

Economic approaches to smoking

In order to assess regulator's legitimacy in discouraging people from smoking, economists model tobacco addiction. In this paper, we review the extent economic literature about tobacco consumption and tobacco addiction. Two main approaches are singled out. In the first section, we detail the main characteristics of the two main theoretical models : rational addiction on one hand, which stylises individual choosing now to give up their future liberty to choose whether or not to smoke; and health capital on the other hand, following which individuals trade off between current pleasure and life expectancy. Second section gives account of the empirical tests of these two theories, before a last section briefly discusses and concludes. We show that the health capital theory seems to pass the test better than the rational addiction model. It is important to discriminate between these two models, from a political economy point of view. Were rational addiction true, a constant and strong increase of taxes on tobacco would be the soundest policy to curb consumption. On the contrary, if smokers are trapped into addiction and can't stop without pain, then tax increase is imposing too much strain on them, for no result. An efficient policy would be to subsidise quitting programmes, or to help smokers reducing their consumption through partial prohibition (in public transports for instance).     

烟草和香芋上斜纹夜蛾的自然种群生命表

应用作用因子生命表方法,组建烟草和香芋上第2、3代斜纹夜蛾Spodoptera litura（Fabricius）自然种群生命表,分析作用因子对斜纹夜蛾种群数量的控制作用。结果表明,2005和2006年烟草和香芋上第2、3代斜纹夜蛾种群的增长倍数均以香芋高于烟草。无论烟草还是香芋上第2、3代斜纹夜蛾,均以“捕食及其它”的排除作用控制指数最大。如排除所有天敌等作用因子的作用,2005年烟草上第2、3代斜纹夜蛾自然种群趋势指数将分别增长31．2029和50．0371倍,香芋上第2、3代斜纹夜蛾自然种群趋势指数将分别增长29．3492和41．2873倍;2006年烟草上第2、3代斜纹夜蛾自然种群趋势指数将分别增长33．1421和75．4167倍,香芋上第2、3代斜纹夜蛾自然种群趋势指数将分别增长31．5357和70．5355倍。说明天敌等自然作用因子对斜纹夜蛾种群数量有较为明显的控制作用,而烟草上的自然作用因子的作用要强于香芋上的自然作用因子。     

Redistribution Spurs Growth by Using a Portfolio Effect on Risky Human Capital

We demonstrate by mathematical analysis and systematic computer simulations that redistribution can lead to sustainable growth in a society. In accordance with economic models of risky human capital, we assume that dynamics of human capital is modeled as a multiplicative stochastic process which, in the long run, leads to the destruction of individual human capital. When agents are linked by fully redistributive taxation the situation might turn to individual growth in the long run. We consider that a government collects a proportion of income and reduces it by a fraction as costs for administration (efficiency losses). The remaining public good is equally redistributed to all agents. Sustainable growth is induced by redistribution despite the losses from the random growth process and despite administrative costs. Growth results from a portfolio effect. The findings are verified for three different tax schemes: proportional tax, taking proportionally more from the rich, and proportionally more from the poor. We discuss which of these tax schemes performs better with respect to maximize growth under a fixed rate of administrative costs, and the governmental income. This leads us to general conclusions about governmental decisions, the relation to public good games with free riding, and the function of taxation in a risk-taking society.     

Estimating consumer preferences for different beverages using the BLP approach

The overconsumption of sugar is a significant problem in many jurisdictions, and one possible method to remedy this problem is the taxation of sugar-sweetened beverages (SSBs). To be able to implement an optimal tax, it is important to know the preferences and price sensitivity of consumers. This article therefore estimates the price elasticity of demand for different beverages in Quebec, using the Berry, Levinsohn and Pakes (BLP) random parameter logistic demand model, combined with Nielsen data from 2010 to 2016 and the 2016 Canadian Census. The results suggest that the average consumer prefers high-calorie beverages containing fruits and vegetables, and the estimated price elasticities are between −4.40 (energy drinks) and −1.59 (regular soft drinks). As a result, consumers of energy drinks appear to reduce their consumption the most in the face of rising prices, whereas consumers of soft drinks will decrease their consumption the least. However, at a general level, the implementation of a tax on SSBs in Quebec should generate a significant reduction in consumption.