For more details of each paper, click on the title.
Tax design in the alcohol market – NEW
(with Rachel Griffith and Martin O’Connell), Working Paper, September 2017.
We study optimal corrective taxation in the alcohol market. Consumption generates negative externalities that are non-linear in the total amount of alcohol consumed. If tastes for products are heterogeneous and correlated with marginal externalities, then varying tax rates on different products can lead to welfare gains. We study this problem in an optimal tax framework and empirically for the UK alcohol market. Welfare gains from optimally varying rates are higher the more concentrated externalities are amongst heavy drinkers. A sufficient statistics approach is informative about the direction of reform, but not about optimal rates when externalities are highly concentrated.
Why do retailers advertise store brand products?
(with Rachel Griffith and Michal Krol), Working Paper, January 2017.
There is divided opinion about the impact of store brands on welfare. We provide new evidence on the strategic behaviour of retailers over the pricing, advertising and positioning of store brands in the UK grocery markets. This motivates a simple Hotelling style model in which we allow both retailers and manufacturers to endogenously advertise their respective brands, accounting for the impact on retailer-manufacturer bargaining (via wholesale price setting) and downstream competition (via retail price setting). Advertising facilitates price discrimination by the retailer, which leads to higher aggregate consumer surplus than when store brands are absent from the market.
The Importance of Product Reformulation Versus Consumer Choice in Improving Diet Quality
(with Rachel Griffith and Martin O’Connell), Economica (2017) 84: 34-53.
Improving diet quality has been a target of public health policy. Governments have encouraged consumers to make healthier food choices and firms to reformulate food products. Evaluation of such policies has focused on the impact on consumer behaviour; firm behaviour has been less well studied. We show that the recent decline in dietary salt intake in the UK was entirely attributable to product reformulation; consumer switching between products worked in the opposite direction and led to a slight increase in grocery salt intensity. These findings point to the important role that firms can play in achieving public policy goals.
Shopping Around: How Households Adjusted Food Spending over the Great Recession
(with Rachel Griffith and Martin O’Connell), Economica (2016) 83: 247-280.
Over the Great Recession UK households reduced real food expenditure. We show that they were able to maintain the number of calories that they purchased, and the nutritional quality of these calories, by adjusting their shopping behaviour. We document the mechanisms that households used. We motivate our analysis with a model of shopping behaviour in which households adjust shopping effort and the characteristics of their shopping basket in response to economic shocks. We use detailed longitudinal data and focus on within household changes in basket characteristics and proxies for shopping effort.
(with Peter Levell and Martin O’Connell), in The Green Budget 2016 (eds.) C. Emmersen, P. Johnson and R. Joyce.
Excise duties make a significant contribution to UK government revenues. In 2014–15, the duties levied on fuel, tobacco and alcohol raised £47 billion, comprising 7.2% of total receipts. However, the future of these taxes is uncertain. Revenues from existing duties are set to decline in coming years, and new planned and proposed regulations, such as plain packaging for cigarettes and minimum pricing for alcohol, would be likely to act to accelerate this process if enacted. At the same time, public health bodies have proposed introducing new duties on foods and beverages with high sugar contents. In this chapter, we consider the current structure of excise duties and the principles that should underpin them. We argue that current duties are not always well designed and we raise similar concerns with regard to proposed sugar taxes. Overall, there is a need for a clear long-term strategy for this part of the tax system, informed by economic principles and empirical evidence.
Work in Progress
A new year, a new you? Heterogeneity and temptation in food purchases
(with Laurens Cherchye, Bram De Rock, Rachel Griffith, Martin O’Connell and Frederic Vermeulen)
How do company owner-managers respond to taxation?
(with Helen Miller and Thomas Pope)
Corrective taxes and imperfect competition
(with Martin O’Connell)