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Cross-Border Health and Productivity Effects of Alcohol Policies

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  • Johansson, Per

    ()
    (IFAU)

  • Pekkarinen, Tuomas

    ()
    (Government Institute for Economic Research, Helsinki)

  • Verho, Jouko

    ()
    (Social Insurance Institution of Finland)

Abstract

This paper studies the cross-border health and productivity effects of alcohol taxes. We estimate the effect of a large cut in the Finnish alcohol tax on mortality, alcohol related illnesses and work absenteeism in Sweden. This tax cut led to large differences in the prices of alcoholic beverages between these two countries and to a considerable increase in cross-border shopping. The effect is identified using differences-in-differences strategy where changes in these outcomes in regions near the Finnish border are compared to changes in other parts of northern Sweden. We use register data where micro level data on deaths, hospitalisations and absenteeism is merged to population-wide micro data on demographics and labour market outcomes. Our results on the effect of the Finnish tax cut on mortality and alcohol-related hospitalisations in Sweden are very imprecise. However, we find that workplace absenteeism increased by 5% for males and by 13% for females near the Finnish border as a result of the tax cut.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6389.

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Length: 29 pages
Date of creation: Feb 2012
Date of revision:
Publication status: forthcoming in: Journal of Health Economics, 2014
Handle: RePEc:iza:izadps:dp6389

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Keywords: health effects of alcohol; alcohol taxes; cross-border shopping;

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  1. Robert L. Ohsfeldt & Michael A. Morrisey, 1997. "Beer Taxes, Workers' Compensation, And Industrial Injury," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 155-160, February.
  2. Larsson, Laura & Runeson, Caroline, 2007. "Moral hazard among the sick and unemployed: evidence from a Swedish social insurance reform," Working Paper Series 2007:8, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  3. Asplund, Björn Marcus & Friberg, Richard & Wilander, Fredrik, 2005. "Demand and Distance: Evidence on Cross-Border Shopping," CEPR Discussion Papers 4983, C.E.P.R. Discussion Papers.
  4. Philip DeCicca & Donald S. Kenkel & Feng Liu, 2010. "Excise Tax Avoidance: The Case of State Cigarette Taxes," NBER Working Papers 15941, National Bureau of Economic Research, Inc.
  5. David Merriman, 2010. "The Micro-geography of Tax Avoidance: Evidence from Littered Cigarette Packs in Chicago," American Economic Journal: Economic Policy, American Economic Association, vol. 2(2), pages 61-84, May.
  6. Johansson, Per & Palme, Marten, 2005. "Moral hazard and sickness insurance," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1879-1890, September.
  7. Padmaja Ayyagari & Partha Deb & Jason Fletcher & William T. Gallo & Jody L. Sindelar, 2009. "Sin Taxes: Do Heterogeneous Responses Undercut Their Value?," NBER Working Papers 15124, National Bureau of Economic Research, Inc.
  8. 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.
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