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Understanding Heterogeneity In Price Elasticities In The Demand For Alcohol For Older Individuals

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  • Padmaja Ayyagari
  • Partha Deb
  • Jason Fletcher
  • William Gallo
  • Jody L. Sindelar

Abstract

This paper estimates the price elasticity of demand for alcohol using Health and Retirement Study data. To account for unobserved heterogeneity in price responsiveness, we use finite mixture models. We recover two latent groups, one is significantly responsive to price, but the other is unresponsive. The group with greater responsiveness is disadvantaged in multiple domains, including health, financial resources, education and perhaps even planning abilities. These results have policy implications. The unresponsive group drinks more heavily, suggesting that a higher tax would fail to curb the negative alcohol‐related externalities. In contrast, the more disadvantaged group is more responsive to price, thus suffering greater deadweight loss, yet this group consumes fewer drinks per day and might be less likely to impose negative externalities. Copyright © 2011 John Wiley & Sons, Ltd.

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  • Padmaja Ayyagari & Partha Deb & Jason Fletcher & William Gallo & Jody L. Sindelar, 2013. "Understanding Heterogeneity In Price Elasticities In The Demand For Alcohol For Older Individuals," Health Economics, John Wiley & Sons, Ltd., vol. 22(1), pages 89-105, January.
    • Handle: RePEc:wly:hlthec:v:22:y:2013:i:1:p:89-105
    DOI: 10.1002/hec.1817
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    Cited by:

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    2. Atella, Vincenzo & Deb, Partha & Kopinska, Joanna, 2019. "Heterogeneity in long term health outcomes of migrants within Italy," Journal of Health Economics, Elsevier, vol. 63(C), pages 19-33.
    3. Paolo Li Donni & Ranjeeta Thomas, 2020. "Latent class models for multiple ordered categorical health data: testing violation of the local independence assumption," Empirical Economics, Springer, vol. 59(4), pages 1903-1931, October.
    4. Partha Deb & Christian A. Gregory, 2016. "Who Benefits Most from SNAP? A Study of Food Security and Food Spending," NBER Working Papers 22977, National Bureau of Economic Research, Inc.
    5. Nelson, Jon P., 2014. "Binge Drinking, Alcohol Prices, And Alcohol Taxes," Working Papers 164652, American Association of Wine Economists.
    6. María Á. García-Valiñas & Roberto Martínez-Espiñeira & Marta Suárez-Varela Maciá, 2021. "Price and Consumption Misperception Profiles: The Role of Information in the Residential Water Sector," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(4), pages 821-857, December.
    7. Fabrice Etilé, 2019. "The Economics of Diet and Obesity: Public Policy," Post-Print hal-02154445, HAL.
    8. Helmut Farbmacher & Peter Ihle & Ingrid Schubert & Joachim Winter & Amelie Wuppermann, 2017. "Heterogeneous Effects of a Nonlinear Price Schedule for Outpatient Care," Health Economics, John Wiley & Sons, Ltd., vol. 26(10), pages 1234-1248, October.
    9. Nelson, Jon P., 2014. "Estimating the price elasticity of beer: Meta-analysis of data with heterogeneity, dependence, and publication bias," Journal of Health Economics, Elsevier, vol. 33(C), pages 180-187.
    10. Subramanian, Arjunan & Kumar, Parmod, 2017. "The impact of price policy on demand for alcohol in rural India," Social Science & Medicine, Elsevier, vol. 191(C), pages 176-185.
    11. Gregory, Christian & Deb, Partha, 2016. "Who Benefits Most from SNAP?," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236648, Agricultural and Applied Economics Association.
    12. Pérez, María & García-Valiñas, María A. & Martínez-Espiñeira, Roberto, 2013. "Responses to changes in domestic water tariff structures: An analysis on household-level data from Granada, Spain," Efficiency Series Papers 2013/04, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    13. Anurag Sharma & Brian Vandenberg & Bruce Hollingsworth, 2014. "Minimum Pricing of Alcohol versus Volumetric Taxation: Which Policy Will Reduce Heavy Consumption without Adversely Affecting Light and Moderate Consumers?," PLOS ONE, Public Library of Science, vol. 9(1), pages 1-13, January.
    14. Partha Deb & Carmen Vargas, 2016. "Who Benefits from Calorie Labeling? An Analysis of its Effects on Body Mass," NBER Working Papers 21992, National Bureau of Economic Research, Inc.
    15. Vinish Shrestha, 2015. "Estimating the Price Elasticity of Demand for Different Levels of Alcohol Consumption among Young Adults," American Journal of Health Economics, MIT Press, vol. 1(2), pages 224-254, Spring.
    16. Durand, Robert B. & Greene, William H. & Harris, Mark N. & Khoo, Joye, 2022. "Heterogeneity in speed of adjustment using finite mixture models," Economic Modelling, Elsevier, vol. 107(C).
    17. Santosh Kumar, 2016. "Price Elasticity of Alcohol Demand in India," Working Papers 1610, Sam Houston State University, Department of Economics and International Business.
    18. Anurag Sharma & Fabrice Etilé & Kompal Sinha, 2016. "The Effect of Introducing a Minimum Price on the Distribution of Alcohol Purchase: A Counterfactual Analysis," Health Economics, John Wiley & Sons, Ltd., vol. 25(9), pages 1182-1200, September.
    19. Jon Nelson, 2015. "Binge drinking and alcohol prices: a systematic review of age-related results from econometric studies, natural experiments and field studies," Health Economics Review, Springer, vol. 5(1), pages 1-13, December.
    20. Ziming Xuan & Thomas F. Babor & Timothy S. Naimi & Jason G. Blanchette & Frank J. Chaloupka, 2016. "Comment on “binge drinking and alcohol prices”," Health Economics Review, Springer, vol. 6(1), pages 1-2, December.
    21. Nelson Jon P. & Moran John R., 2020. "Effects of Alcohol Taxation on Prices: A Systematic Review and Meta-Analysis of Pass-Through Rates," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(1), pages 1-21, January.
    22. James Fogarty & Giri Parameswaran, 2017. "Alcohol Sin Taxes," Working Papers 257211, University of Western Australia, School of Agricultural and Resource Economics.

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