Academic journal article Contemporary Economic Policy

Estimating the Impact of Beer Prices on the Incidence of Sexually Transmitted Diseases: Cross-Province and Time Series Evidence from Canada

Academic journal article Contemporary Economic Policy

Estimating the Impact of Beer Prices on the Incidence of Sexually Transmitted Diseases: Cross-Province and Time Series Evidence from Canada

Article excerpt

1. INTRODUCTION

Risky sexual activity can result in significant societal costs. Specifically, sex without proper protection might ultimately lead to an increase in the incidence of sexually transmitted diseases (STDs) and therefore considerable health treatment costs. For example, it has been estimated that the nine million new cases of STDs that occurred among 15- to 24-yr-olds in the United States in 2000 resulted in societal costs of US$6.5 billion. (1) Hence, understanding the effects of policies that might reduce unsafe sex or alternatively, encourage safer and more responsible practice, assumes enhanced importance.

In this respect, economists have conducted a considerable amount of empirical research aimed at evaluating the efficacy of a variety of alcohol policies and regulations on STDs. The intuition is that a decrease in alcohol consumption should result in less risky sexual behavior and therefore a reduction in STDs. This paper attempts a modest contribution to the existing literature by employing Canadian data to evaluate the effects of beer prices on STDs across all ages. We accomplish this by exploiting variation in gonorrhea rates for all ages across provinces and over time between 1981 and 1999 and corresponding provincial chlamydia rates from 1991 to 1999.

Such an exercise has obvious benefits from the perspective of Canadian policy. However, there are wider applications. First, given that most research has been exclusively confined to the analysis of U.S. policies, the evaluation of similar Canadian regulatory measures is a useful confirmatory analysis in terms of understanding the efficacy of a variety of policies from a different but comparable jurisdiction. The merits of such research are enhanced by the fact that while the United States does have the highest rate of STDs among Western countries, the decline in STD rates in Canada has also been comparable with gonorrhea rates, falling by approximately 93% from the early 1980s to the late 1990s.

Second, different studies using U.S. data arrive at varying conclusions regarding the efficacy of beer or alcohol taxes. Specifically, while Chesson, Harrison, Kassler (2000) obtain rather large implied tax effects with respect to state-level gonorrhea and syphilis rates, Carpenter (2005) finds beer taxes to be insignificantly correlated with youth gonrrhea rates. On the other hand, using comparable data, Grossman, Kaestner, and Markowitz (2005) find higher beer taxes to be significantly associated with a reduction in male gonorrhea rates. The use of Canadian data across a reasonable number of jurisdictions and a relatively long time period should be useful in resolving these ambiguities.

But perhaps the most seminal contribution from the use of Canadian data stems from the predominant reliance of U.S. studies on excise beer taxes. This empirical strategy makes sense from a reduced form perspective as higher taxes should result in higher prices and therefore less consumption. However, we argue that a better methodology is to match STD rates to beer prices instead of taxes. The traditional emphasis of U.S. studies on beer taxes rather than prices can probably be explained by the difficulties associated with obtaining price data across states and over a relatively long time period. In comparison, data on provincial Canadian beer prices are available from the 1970s onward. We exploit these data to estimate the impact of real beer prices on gonorrhea and chlamydia rates. But we also evaluate the effects of beer taxes by calculating the pass through rate of federal excise beer levies with respect to prices.

Our findings suggest that higher beer prices (1) do result in lower STD rates and (2) implied price elasticities within a narrow range of --0.7 to --0.9 with respect to gonorrhea and chlamydia rates. Further, instrumental variables (IV) estimates (from instrumenting beer prices by federal excise tax levies and political party fixed effects) are quite comparable, confirming that an increase in taxes, controlling for everything else, results in higher prices, and ultimately lower gonorrhea and chlamydia rates. …

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