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Driven to Drink. Sin Taxes Near a Border

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Abstract
This paper investigates household purchasing behavior in response to differing alcohol and tobacco taxes near an international border. Our study suggests that large tax differentials near borders induce economically important tax avoidance behavior that may limit a government's ability to raise revenue and potentially undermine the pursuit of important health and social policy goals. We match novel supermarket scanner and consumer expenditure data to measure the size and scope of the effect for households and stores. We find that stores near/far from the international border have statistically significantly lower/higher sales of beer and tobacco than comparable stores far/near the border. Moreover, we find that households near the border report higher consumption of these same goods. This is consistent with households facing lower prices. Finally, we find measures of externalities associated with the consumption of alcohol and tobacco are higher near the border.

Suggested Citation

  • Timothy K.M. Beatty & Erling Røed Larsen & Dag Einar Sommervoll, 2007. "Driven to Drink. Sin Taxes Near a Border," Discussion Papers 507, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:507
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    Cited by:

    1. Marco Francesconi & Jonathan James, 2022. "Alcohol Price Floors and Externalities: The Case of Fatal Road Crashes," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 41(4), pages 1118-1156, September.
    2. Manudeep Bhuller & Tarjei Havnes & Edwin Leuven & Magne Mogstad, 2013. "Broadband Internet: An Information Superhighway to Sex Crime?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(4), pages 1237-1266.
    3. Pierre Pestieau & Gregory Ponthiere, 2012. "Myopia, regrets, and risky behaviors," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(2), pages 288-317, April.
    4. Christian Ben Lakhdar & Nicolas Gérard Vaillant & François-Charles Wolff, 2016. "Does smoke cross the border? Cigarette tax avoidance in France," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(9), pages 1073-1089, December.
    5. Geys, Benny & Heggedal, Tom-Reiel & Sørensen, Rune J., 2017. "Are bureaucrats paid like CEOs? Performance compensation and turnover of top civil servants," Journal of Public Economics, Elsevier, vol. 152(C), pages 47-54.
    6. Francis Markham & Bruce Doran & Martin Young, 2014. "The Spatial Extents of Casino Catchments in Australia," Growth and Change, Wiley Blackwell, vol. 45(1), pages 60-78, March.
    7. Benny Geys & Steffen Osterloh, 2013. "Borders As Boundaries To Fiscal Policy Interactions? An Empirical Analysis Of Politicians’ Opinions On Rivals In The Competition For Firms," Journal of Regional Science, Wiley Blackwell, vol. 53(4), pages 583-606, October.
    8. Henry Yeomans, 2019. "Regulating drinking through alcohol taxation and minimum unit pricing: A historical perspective on alcohol pricing interventions," Regulation & Governance, John Wiley & Sons, vol. 13(1), pages 3-17, March.
    9. Watson, Philip & Winfree, Jason & Toro-González, Daniel, . "Fiscal Impacts and Cross-Border Effects of a Change in State Liquor Policy," Journal of Food Distribution Research, Food Distribution Research Society, vol. 51(2).
    10. Kenchington, David G. & Shohfi, Thomas D. & Smith, Jared D. & White, Roger M., 2022. "Do sin tax hikes spur cheating in interpersonal exchange?," Accounting, Organizations and Society, Elsevier, vol. 96(C).

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    More about this item

    Keywords

    Alcohol Consumption; Tobacco Consumption; Border Trade; Taxation;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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