Reducing Underage Drinking A Collective Responsibility (2004) / Chapter Skim
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9 The Effects of Price on Alcohol Use, Abuse, and Their Consequences--Frank J. Chaloupka
9 The Effects of Price on Alcohol Use, Abuse, and Their Consequences--Frank J. Chaloupka
Pages 541-564
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From page 541... ...
Similarly, many studies have considered the impact of price on a wide range of problems caused by alcohol use and abuse, including nonfatal and fatal accidents caused by drinking and driving, liver cirrhosis and other alcohol-related diseases, violence and other crime linked to alcohol, decreased educational attainment, and more. Several of these studies have focused on high-risk populations, such as youth and young adults, including college students.
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From page 542... ...
Federal excise taxes on alcohol date back to the late eighteenth century and have been raised over time, most often to generate new revenues during wartime.2 Over the past half-century, however, federal excise taxes on alcoholic beverages have been increased infrequently, with the most recent increases aimed at reducing gov 1This chapter draws heavily on several recent reviews, including Chaloupka, Grossman, and Saffer (1998, 2002) , Cook and Moore (2000, 2002)
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From page 543... ...
These taxes currently range from $1.07 per wine gallon for wine with alcohol content not more than 14 percent to $3.40 per wine gallon for champagne and sparkling wines. As with the other federal alcoholic beverage excise taxes, the inflation-adjusted values 3For example, federal beer and wine excise taxes were last increased in 1991 (the first increases in both since 1951)
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From page 544... ...
In general, the same patterns emerge at the state level, with state distilled spirits taxes typically at the highest rate per drink, taxes increasing infrequently and modestly over time, and, as a result, real values of state alcoholic beverage excise taxes falling significantly over time. State alcoholic beverage excise taxes are more mixed, with some states applying specific taxes and others using ad valorem taxes (taxes expressed as a percentage of price, rather than based on quantity or volume)
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From page 545... ...
Given the research I will discuss, allowing the real value of alcoholic beverage excise taxes and, consequently, prices, to decline over time will result in increased drinking and its consequences. Policies Affecting Distribution, Competition, and Price In addition to taxation, a number of other alcohol-related policies directly or indirectly influence the prices of alcoholic beverages.
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From page 546... ...
Similarly, a number of states have regulations that require wholesalers to post or file prices for alcoholic beverages, with the stated or implicit intent of at least some of these policies to reduce price competition in the alcoholic beverage markets. Others restrict wholesalers' ability to price discriminate by granting volume discounts that would result in lower perunit prices for retailers that buy in large quantities, which could result in lower retail prices in these outlets.
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From page 547... ...
Defenders argue that these policies are allowed by the 21st Amendment, which repealed prohibition and gave states the power to regulate the distribution of alcoholic beverages. Finally, some states have limited the ability of retailers to advertise prices for alcoholic beverages, arguing that price advertising would result in greater price competition in the alcoholic beverage markets, lower alcoholic beverage prices, and increased drinking and its consequences.
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From page 548... ...
Some studies use measures of actual alcoholic beverage prices taken from various data sources, while others employ measures of alcoholic beverage taxes (most frequently beer taxes) as a proxy for alcoholic beverage prices.
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From page 549... ...
In addition to the short-term consequences of heavy drinking during these ages, there can also be substantial adverse effects in the long run as a result of the negative impact of drinking on educational attainment and other factors. Grossman and his colleagues were the first to study the impact of alcoholic beverage prices on youth alcohol use, using data from the first and second waves of the National Health and Nutrition Examination Surveys conducted in the 1970s (Grossman, Coate, and Arluck, 1987; Coate and Grossman, 1988)
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From page 550... ...
Thus, when drinking ages are relatively low, a given increase in the monetary price of alcoholic beverages has a larger impact on the full price of alcohol for youth than does the same increase when drinking ages are higher. More recently, Cook and Moore (2001)
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From page 551... ...
In contrast to the earlier research on price and youth drinking, including the studies described, Dee found that beer taxes do not significantly affect any of his measures of teen drinking when the state fixed effects are included. Dee's findings, however, should be treated with caution before rejecting the findings from the earlier research that concluded that higher taxes and prices would lead to significant reductions in youth drinking, particularly heavy and frequent drinking.
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From page 552... ...
Failing to account for these, particularly during a time when these policies are changing in many states, can lead to measurement errors in models that use taxes as a proxy for price, producing biases that are exacerbated when fixed effects are included. To summarize, the majority of studies on price and youth drinking conclude that higher alcoholic beverage prices significantly reduce the probability, frequency, and level of drinking among youth.
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From page 553... ...
Estimates from the addictive models provided strong support for the hypothesis that alcohol consumption is an addictive behavior for this age group in the sense that strong interdependency exists between past, current, and future alcohol consumption. Regardless of the approach, the authors found consistent evidence that higher alcoholic beverage prices led to significant reductions in alcohol consumption among young adults.
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From page 554... ...
Similarly, they found that the greater availability of fixed-price events increased the probability of crossing both thresholds, consistent with the hypothesis that these events significantly reduced the per-drink cost. Alcoholic Beverage Prices and the Consequences of Alcohol Use and Abuse Economists have studied the impact of alcoholic beverage taxes and prices on numerous outcomes associated with alcohol use and abuse, including nonfatal and fatal traffic crashes caused by drinking and driving, self-reported drinking and driving behavior, other accidents, liver cirrhosis and other alcohol-related mortality, violence and other crime, suicide, risky sexual behavior, and decreased educational attainment.
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From page 555... ...
Saffer and Grossman (1987a, 1987b) , for example, were the first to consider the impact of beer taxes on state-level motor vehicle accident fatality rates, using data from all states from 1975 through 1981 and controlling for other factors expected to impact the probability of fatal crashes, including drinking ages.
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From page 556... ...
In contrast to the Dee study on youth drinking discussed earlier, the inclusion of state fixed effects in the motor vehicle accident fatality equations did not change the findings, with Ruhm concluding that higher beer taxes would lead to significant reductions in fatal traffic crashes. In general, the estimates from econometric analyses of alcoholic beverage taxes or prices and fatal traffic crashes imply that a 10 percent increase in price would reduce overall traffic crashes by 5 to 10 percent, with even larger reductions -- 7 to 17 percent -- for youth.
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From page 557... ...
found little impact of alcoholic beverage prices on deaths for which alcohol is a primary cause, including liver cirrhosis deaths, using state-level data from 1982 through 1988. However, they did find that higher alcoholic beverage prices led to significant reductions in a number of other alcohol-related death rates, including suicides, diseases for which alcohol is a contributing factor (including various cancers)
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From page 558... ...
In their 1998 analysis, for example, Markowitz and Grossman used data from the 1976 National Family Violence survey to examine the impact of beer taxes and other alcohol control policies, as well as illegal drug prices and related policies, on child abuse. They concluded that an increase in beer taxes would lead to significant reductions in child abuse.
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From page 559... ...
Saffer found consistent evidence that higher beer taxes lead to significant reductions in crime, with estimates for subsamples based on age showing a relatively larger impact on crime and violence among those under age 21 than on older individuals. The rapidly growing research on the impact of alcoholic beverage prices and control policies on violence and other crime produces generally consistent findings that increases in taxes and prices lead to significant reductions in violence.
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From page 560... ...
Two recent papers using data from the 1997 and 1999 waves of the Harvard College Alcohol Survey provide additional evidence on the impact of alcoholic beverage taxes and prices on measures of study habits and school performance among college students. Williams, Powell, and Wechsler (2002)
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From page 561... ...
. Effects of alcoholic beverage prices and legal drinking ages on youth alcohol use.
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From page 562... ...
. Price sensitivity of alcoholic beverages in the United States.
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From page 563... ...
. Beer taxes, the legal drinking age, and youth motor vehicle fatalities.
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From page 564... ...
. Alcohol taxes and beverage prices.
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