Program > Program by speaker > Calcott Paul

Minimum Unit Prices (MUPs) have been proposed on the grounds that they can reduce alcohol consumption by the heaviest drinkers, without significantly burdening moderate drinkers. This paper examines the case for MUPs in an optimal tax framework. Conditions are identified under which the optimal policy mix involves a MUP in addition to a corrective tax. The implications that inelastic demand for alcohol may have for this mix are explored with a calibrated numerical example. The final issue to be addressed is the danger that consumers may respond to a specific tax with quality substitution.