When Helping the Small Hurts the Middle: Beer Excise Duties and Market Concentration

The beer market has undergone a dramatic change over the last decades and there are growing concerns of too much market concentration. Among other reasons we identify the role of beer excise taxes in the determination of the market structure. In particular the introduction of a minimum excise tax for beer in the European Union with the provision for a asymmetric reduction for small breweries can create incentives for small breweries. While we find evidence that high beer excise taxes increase the likelihood to be target of an international takeover, the overall role of beer taxes on the market structure is ambiguous. While the reduced beer excise for small breweries fosters new entries, they potentially squeeze out mid-sized breweries resulting in an even more concentration market.