Academic journal article Alcohol Research

The Effects of Prices on Alcohol Use and Its Consequences

Academic journal article Alcohol Research

The Effects of Prices on Alcohol Use and Its Consequences

Article excerpt

Over the past three decades, economists and others have devoted considerable effort to assessing the impact of alcoholic-beverage taxes and prices on alcohol consumption and its related adverse consequences. Federal and State excise taxes have increased only rarely and, when adjusted for inflation, have declined significantly over the years, as have overall prices for alcoholic beverages. Yet studies examining the effects of increases of monetary prices (e.g., through raising taxes) on alcohol consumption and a wide range of related behavioral and health problems have demonstrated that price increases for alcoholic beverages lead to reduced alcohol consumption, both in the general population and in certain highrisk populations, such as heavier drinkers or adolescents and young adults. These effects seem to be more pronounced in the long run than in the short run. Likewise, price increases can help reduce the risk for adverse consequences of alcohol consumption and abuse, including drinking and driving, alcohol-involved crimes, liver cirrhosis and other alcohol-related mortality, risky sexual behavior and its consequences, and poor school performance among youth. All of these findings indicate that increases in alcoholic-beverage taxes could be a highly effective option for reducing alcohol abuse and its consequences. KEY WORDS: Alcoholic beverage; alcoholicbeverage distribution laws; alcoholicbeverage sales; alcoholicbeverage tax; alcoholicbeverage price; price elasticity; supply and demand; policy on alcoholic beverages; economic theory of alcohol and other drug (AOD) use; problematic AOD use

Over the past three decades, economists and others have devoted considerable effort to assessing the impact of alcoholicbeverage taxes and prices on alcohol consumption and its related adverse consequences. Numerous studies have examined the effects of increases in monetary prices (e.g., through raising taxes) on a wide range of behavioral and health problems related to alcohol use, including heavy drinking, drinking and driving, violence and other related crimes, liver cirrhosis mortality, suicides, reproductive issues (including risky sexual behaviors, sexually transmitted diseases, and abortions), and school performance. Some of these studies specifically have focused on highrisk populations, such as adolescents and young adults.

This article first briefly reviews trends in alcoholicbeverage excise taxes as well as the limited literature addressing the connection between taxes and prices. The majority of the article then focuses on studies investigating the effects of prices (or taxes) on alcohol use and abuse and related adverse consequences (for additional reviews, see Chaloupka 2002; Chaloupka et al. 1998, 2002; Cook and Moore 2000, 2002; Wagenaar et al. 2010). Given the size and scope of the literature in this area, this article is not intended to be an encyclopedic review but aims to summarize the general findings and highlight recent studies. Taken together, the findings confirm an inverse relationship between alcohol prices and the demand for alcohol consumption-that is, the higher the price, the lower the demand. Moreover, policies that raise alcoholicbeverage taxes and, consequently, prices are effective in reducing alcohol use and abuse as well as related health, economic, and social consequences.

Trends in AlcoholicBeverage Taxes and Prices

From an economic perspective, various public policies that can affect the full price of alcoholic beverages-that is, the monetary costs (i.e., prices) plus the time costs and expected legal costs associated with alcohol use-also influence alcohol use. For example, Xu and Kaestner (2010) found that the increases in weekly hours of work were inversely associated with binge drinking-that is, bingedrinking frequency declined if people had less free time. Likewise, other studies showed that minimumdrinkingage and zerotolerance laws reduced youth alcohol consumption and driving after drinking by increasing the expected legal costs of alcohol use (Carpenter 2004; Hingson et al. …

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