Beer and Low Malt Beer Taxation and Welfare in Japan

We present a quantitative evaluation of welfare losses stemming from beer and low malt beer taxation. For evaluating economic welfare, we build a standard model of consumers' utility maximization. In this model, we find that the price elasticity of demand has a key role in evaluating welfare. Therefore, we estimate the price elasticity of demand using scanner data.

The result shows that the price elasticity of demand is about 4.3, based on our estimates using high frequency data. This indicates that welfare losses due to taxation on low malt beer are about 240 billion yen.