The main objective of this study is to estimate the price elasticity of demand for alcohols in the UK. The elasticities will be used to capture the behavioural impact from changes in the rates of UK alcohol duties on tax revenue. We have used a Tobit model to estimate data from the Expenditure and Food Survey. The motivation for pursuing Tobit originated with the difficulties in dealing with the large numbers of zero consumption observations reported in the survey. The results appear to be robust. We have been able to determine a full set of elasticities for both the on‐trade and the off‐trade and across all five major product categories: giving a total of 10 own‐price elasticities and a further 90 cross‐price elasticities. The own‐price elasticities are all negative and highly significant. The income elasticities also appear to be sound. The results in this study mark a major improvement in level of detail that HMRC is able to employ within its alcohol costings model. This work has benefited a great deal from the assistance of the following people
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