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The Effects of Alcohol Prohibition on Alcohol Consumption

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  • Jeffrey A. Miron

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Abstract

This paper examines the impact of Prohibition on alcohol consumption. Since data on both the price and quantity of alcohol are unavailable during the Prohibition period, it is not possible to estimate Prohibition's impact on either the supply or demand for alcohol. Assuming the existence of a reasonable proxy for alcohol consumption, however, it is possible to estimate the net impact of Prohibition on the equilibrium quantity of alcohol consumed. I estimate this effect under a range of assumptions about the nature of preferences, taking into account other possible determinants of alcohol consumption and the proxy series. The overall conclusion of the paper is that Prohibition exerted a modest and possibly even a positive effect on alcohol consumption. One possible interpretation of the results is that the demand for alcohol is relatively inelastic, although many earlier studies find substantial elasticity in the demand for alcohol. Another possible interpretation is that Prohibition created a forbidden fruit effect that increased preferences for alcohol, tending to offset the depressing effects of increased prices on demand. Still a third possibility is that Prohibition failed to raise alcohol prices substantially, perhaps because black markets suppliers face low marginal costs of evading government regulations and taxes. Existing data provide some support for this last possibility.

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Bibliographic Info

Paper provided by Boston University - Industry Studies Programme in its series Papers with number 0078.

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Date of creation: Jun 1997
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Handle: RePEc:fth:bostin:0078

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Postal: Boston University, Industry Studies Program; Department of Economics, 270 Bay Road, Boston, Massachusetts 02215.
Phone: 617-353-4389
Fax: 617-353-444
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Web page: http://www.bu.edu/econ/isp/
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  1. Gary S. Becker & Michael Grossman & Kevin M. Murphy, 1990. "An Empirical Analysis of Cigarette Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 61, Chicago - Center for Study of Economy and State.
  2. Motta, Massimo, 1997. "Advertising Bans," CEPR Discussion Papers 1613, C.E.P.R. Discussion Papers.
  3. Manning, Willard G. & Blumberg, Linda & Moulton, Lawrence H., 1995. "The demand for alcohol: The differential response to price," Journal of Health Economics, Elsevier, vol. 14(2), pages 123-148, June.
  4. Miron, Jeffrey A & Zwiebel, Jeffrey, 1991. "Alcohol Consumption during Prohibition," American Economic Review, American Economic Association, vol. 81(2), pages 242-47, May.
  5. Michael Grossman & Frank J. Chaloupka & Ismail Sirtalan, 1995. "An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels," NBER Working Papers 5200, National Bureau of Economic Research, Inc.
  6. Frank J. Chaloupka & Henry Wechsler, 1995. "The Impact of Price, Availability, and Alcohol Control Policies on Binge Drinking in College," NBER Working Papers 5319, National Bureau of Economic Research, Inc.
  7. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
  8. Frank J. Chaloupka, 1990. "Rational Addictive Behavior and Cigarette Smoking," NBER Working Papers 3268, National Bureau of Economic Research, Inc.
  9. Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
  10. Jeffrey A. Miron & Jeffrey Zwiebel, 1995. "The Economic Case against Drug Prohibition," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 175-192, Fall.
  11. Michael J. Moore & Philip J. Cook, 1995. "Habit and Heterogeneity in the Youthful Demand for Alcohol," NBER Working Papers 5152, National Bureau of Economic Research, Inc.
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Cited by:
  1. Abbink, Klaus & Dasgupta, Utteeyo & Gangadharan, Lata & Jain, Tarun, 2012. "Letting the briber go free: an experiment on mitigating harassment bribes," MPRA Paper 42176, University Library of Munich, Germany.
  2. Kenneth W. Clements & Xueyan Zhao, 2005. "Economic Aspects of Marijuana," Economics Discussion / Working Papers 05-28, The University of Western Australia, Department of Economics.
  3. Kenneth W Clements & Yihui Lan & Xueyan Zhao, 2006. "The Demand for Vice: Inter-Commodity Interactions with Uncertainty," Economics Discussion / Working Papers 06-30, The University of Western Australia, Department of Economics.
  4. Angela K. Dills & Jeffrey K. Miron, 2003. "Alcohol Prohibition and Cirrhosis," NBER Working Papers 9681, National Bureau of Economic Research, Inc.
  5. Clements, Kenneth W., 2003. "Three Facts About Marijuana Prices," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57846, Australian Agricultural and Resource Economics Society.

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