Who Pays the Bar Tab? Beer Consumption and Economic Growth in the United States

By Cesur, Resul; Kelly, Inas Rashad | Economic Inquiry, January 2014 | Go to article overview

Who Pays the Bar Tab? Beer Consumption and Economic Growth in the United States


Cesur, Resul, Kelly, Inas Rashad, Economic Inquiry


What drug provides Americans with the greatest pleasure and the greatest pain? The answer, hands down, is alcohol. The pain comes not only from drunk driving and lost lives but also addiction, family strife, crime, violence, poor health, and squandered human potential. Young and old, drinkers and abstainers alike, all are affected. Every American is paying for alcohol abuse.

--Phillip J. Cook, Paying the Tab: The Costs and Benefits of Alcohol Control (2007)

I. INTRODUCTION

Alcohol consumption has severe social and economic consequences: lost productivity, disability, early death, crime, family neglect, personality deterioration, to name a few (Cook 2007). At the individual level, the effects of alcohol consumption have been explored considerably by researchers in different fields, including economics, medicine, public health, criminology, and sociology. However, few studies have examined the economic impact of alcohol use at the aggregate level.

Probably, due to the research deficiency regarding its aggregate effects, some disagreement exists about the overall net benefits of alcohol use. On the one hand, scholars who have done extensive research on individual outcomes claim that the overall costs of alcohol use outweigh its benefits. For example, Cook and Moore (2002, 120) state in their review article, "The production and sale of alcoholic beverages account for a small share of national product in the United States and in other advanced economies. However, the deleterious effects of alcohol consumption on health and safety constitute a substantial economic burden, reducing our overall standard of living."

On the other hand, organizations formed by the producers and distributors of alcoholic beverages claim that the alcoholic beverage industry contributes significantly to the U.S. economy through job creation and tax revenues. According to Beer Serves America (2011), an organization sponsored by the Beer Institute and the National Beer Wholesalers Association (NBWA):

   Directly and indirectly, the beer industry employs
   approximately 1.8 million Americans, paying them
   over $71 billion in wages and benefits. The industry
   pays over $44 billion in business, personal and consumption
   taxes, including $5.3 billion in excise taxes
   and $5.8 billion in sales, gross receipts, and other
   taxes. (1)

Similarly, the Distilled Spirits Council of the United States (DISCUS 1999), the national trade association representing America's leading distillers and about 70% of all distilled spirits brands sold in the United States, states that the alcohol beverage industry is a major contributor to the U.S. economy through job creation, wages, and taxes. (2)

Room and Jernigan (2000) point out that the benefits reaped from the alcohol industry in terms of economic development should be weighed against the negative impacts on economic development in addition to public health. They go on to say that alcohol's contribution to total production can vary tremendously from country to country (generating 3% of total manufacturing value added in Argentina or the Netherlands, but as little as 0.07% in Iran). Aside from the aforementioned contributions of the alcohol industry to the economy often cited by the industry itself, supply-side efforts also play a role in the consumption of alcohol. This can be done through influencing government regulation of the market for alcohol and selling cheap alcohol in bulk, which has "a devastating public health impact" (Stockwell and Crosbie 2001). Indeed, the economic burden of excessive alcohol consumption has been found to be substantial, recently estimated at $223.5 billion (Bouchery et al. 2011).

Although a few studies have examined the impact of macroeconomic conditions on drinking prevalence and patterns, such as those by Ruhm and Black (2002) and Ruhm (1995), we are not aware of any studies exploring the impact of alcohol consumption on economic growth. …

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