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Repeal Of Prohibition: A Benefit-Cost Analysis

Author

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  • Donald F. Vitaliano

Abstract

type="main" xml:id="coep12065-abs-0001"> In spite of an estimated increase in annual alcohol-related motor vehicle costs of $2.767 billion (1947 dollars), the net social benefit of repeal of alcohol Prohibition amounts to $432 million per annum in 1934–1937, about 0.33% of gross domestic product. Total benefits of $3.25 billion consist primarily of increased consumer and producer surplus, tax revenues, and reduced criminal violence costs. A Monte Carlo simulation shows the probability of negative net benefits is 16%. The estimated price elasticity of demand for spirits, beer, and wine are –.60, −.56, and –.51 respectively, which is consistent with the modern literature. (JEL D61, I18, K420, I120)

Suggested Citation

  • Donald F. Vitaliano, 2015. "Repeal Of Prohibition: A Benefit-Cost Analysis," Contemporary Economic Policy, Western Economic Association International, vol. 33(1), pages 44-55, January.
    • Handle: RePEc:bla:coecpo:v:33:y:2015:i:1:p:44-55
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    File URL: http://hdl.handle.net/10.1111/coep.2015.33.issue-1
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    Cited by:

    1. Donal Mac Géidigh & Friedrich Schneider & Matthias Blum, 2016. "Grey Matters: Charting the Development of the Shadow Economy," CESifo Working Paper Series 6234, CESifo.

    More about this item

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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