| Popis: |
In this paper, we develop a novel methodology for constructing price indices of India Made Foreign Liquor (IMFL), which account for incompatible state-level taxation structure and policies across seven states in India. We use this price index to compute price and tax elasticity of IMFL in the seven states. We find that a 1% increase in price leads to only a 0.057% decline in consumption while a 1% increase in tax reduces alcohol consumption by 0.14%. We extend our estimates to show that a 10% increase in taxes will lead to an 8.4% increase in tax revenue. Our results are the most updated estimates of alcohol consumption elasticities, which overcomes several challenges such as varying manufacturing costs across states and varying tax across types of products within states, which other papers do not. |
