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The Effect of Alcohol Prohibition on Alcohol Consumption

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  • Jeffrey A. Miron

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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7130.

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Date of creation: May 1999
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Publication status: published as Dills, Angela K. & Jacobson, Mireille & Miron, Jeffrey A., 2005. "The effect of alcohol prohibition on alcohol consumption: evidence from drunkenness arrests," Economics Letters, Elsevier, vol. 86(2), pages 279-284, February.
Handle: RePEc:nbr:nberwo:7130

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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. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
  3. 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.
  4. Frank J. Chaloupka, 1990. "Rational Addictive Behavior and Cigarette Smoking," NBER Working Papers 3268, National Bureau of Economic Research, Inc.
  5. 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.
  6. Jeffrey A. Miron & Jeffrey Zwiebel, 1991. "Alcohol Consumption During Prohibition," NBER Working Papers 3675, National Bureau of Economic Research, Inc.
  7. 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.
  8. Massimo Motta, 1996. "Advertising bans," Economics Working Papers 205, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 1997.
  9. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
  10. Grossman, Michael & Chaloupka, Frank J & Sirtalan, Ismail, 1998. "An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 39-48, January.
  11. 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.
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Cited by:
  1. Kenneth W. Clements, 2002. "Three Facts About Marijuana Prices," Economics Discussion / Working Papers 02-10, The University of Western Australia, Department of Economics.
  2. 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.
  3. Kenneth W. Clements & Xueyan Zhao, 2005. "Economic Aspects of Marijuana," Economics Discussion / Working Papers 05-28, The University of Western Australia, Department of Economics.
  4. Klaus Abbink & Utteeyo Dasgupta & Lata Gangadharan & Tarun Jain, 2013. "Letting the Briber Go Free: An Experiment on Mitigating Harassment Bribes," Development Research Unit Working Paper Series 62-13, Monash University, Department of Economics.
  5. Angela K. Dills, 2004. "Alcohol Prohibition and Cirrhosis," American Law and Economics Review, Oxford University Press, vol. 6(2), pages 285-318.

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