08-08-2012, 03:50 PM
The Effects of Price on Alcohol Consumption and Alcohol-Related Problems
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Analytical Considerations
Economic studies of alcohol demand focus mainly on the effects of price on alcohol consumption. To describe the sensitivity of consumption to changes in monetary price, economists frequently refer to the price elasticity of demand2 (i.e., the percentage change in consumption resulting from a 1-percent increase in price). For example, a price elasticity of alcohol demand of -0.5 means that a 1-percent increase in price would reduce alcohol consumption by 0.5 percent (or a 10-percent increase in price would reduce consumption by 5 percent). An extensive review of the economic literature on alcohol demand concluded that based on studies using aggregate data (i.e., data that report the amount of alcohol consumed by large groups of people), the price elasticities of demand for beer, wine, and distilled spirits are -0.3, -1.0, and -1.5, respectively (Leung and Phelps 1993).
Motor Vehicle Crashes
Saffer and Grossman (1987a,b) first examined the impact of beer excise taxes and MLDAs on youth fatality rates from motor vehicle crashes. The investigators used State-level fatality rates for youths ages 15 to 17, 18 to 20, and 21 to 24 for the years 1975 through 1981 and controlled for various other factors expected to affect drinking and driving and the probability of fatal crashes.
Violence and Other Crime
Because a variety of crimes are related to alcohol use and abuse (Bureau of Justice Statistics 1988), numerous studies have assessed the influences of changes in alcohol prices on crime rates. For example, Cook and Moore (1993) examined the impact of per capita alcohol consumption and beer excise taxes on violent crime rates (i.e., homicides, assaults, rapes, and burglaries), using annual State-level data obtained from the 1979 through 1987 Uniform Crime Reports.
Discussion
This article has summarized the economic research examining the impact of the full price of alcoholic beverages on drinking and heavy drinking by teenagers and young adults. It also has reviewed similar research that explores the relationship between price and out-comes related to the abuse of alcohol by youths and adults, including drinking and driving and motor vehicle crashes, health consequences of alcohol consumption, and violence and other crime.