IDEAS home Printed from https://ideas.repec.org/a/tpr/amjhec/v1y2015i2p224-254.html
   My bibliography  Save this article

Estimating the Price Elasticity of Demand for Different Levels of Alcohol Consumption among Young Adults

Author

Listed:
  • Vinish Shrestha

    () (Emory University, Department of Economics)

Abstract

Understanding the effect of higher alcohol prices on alcohol demand according to one’s level of alcohol consumption is crucial while evaluating the effectiveness of using alcohol taxes as an alcohol-control medium. In this study, I estimate the differential responses to alcohol prices on alcohol demand for young adults by asking whether heavy drinkers are more responsive to higher alcohol prices than light and moderate drinkers. To conduct the analysis, I use the data from the National Longitudinal Survey of Youth (NLSY97) for the years 1997 to 2008. To answer the research question on hand, I implement three different econometric methods: (1) pooled quantile regression; (2) quantile regression for panel data; and (3) finite mixture models. Findings from these methods consistently suggest that heavy drinkers respond to higher alcohol prices by lowering their alcohol intake. Since alcohol-related externalities are likely to be caused by heavy drinkers, the results emphasize the possibility of higher alcohol taxes curbing alcohol-related externalities associated with young adults by lowering the alcohol consumption among the heavy drinkers.

Suggested Citation

  • 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.
  • Handle: RePEc:tpr:amjhec:v:1:y:2015:i:2:p:224-254
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/AJHE_a_00013
    File Function: link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
    2. Donald S. Kenkel, 2005. "Are Alcohol Tax Hikes Fully Passed Through to Prices? Evidence from Alaska," American Economic Review, American Economic Association, vol. 95(2), pages 273-277, May.
    3. Lisa Cameron & Jenny Williams, 1999. "Substitutes or Complements? Alcohol, Cannabis and Tobacco," School of Economics Working Papers 1999-02, University of Adelaide, School of Economics.
    4. Sara Markowitz, 2000. "The Price of Alcohol, Wife Abuse, and Husband Abuse," Southern Economic Journal, Southern Economic Association, vol. 67(2), pages 279-303, July.
    5. Ruhm, Christopher J., 1996. "Alcohol policies and highway vehicle fatalities," Journal of Health Economics, Elsevier, vol. 15(4), pages 435-454, August.
    6. Lindo, Jason M. & Swensen, Isaac D. & Waddell, Glen R., 2013. "Alcohol and student performance: Estimating the effect of legal access," Journal of Health Economics, Elsevier, vol. 32(1), pages 22-32.
    7. Ruhm, Christopher J. & Jones, Alison Snow & McGeary, Kerry Anne & Kerr, William C. & Terza, Joseph V. & Greenfield, Thomas K. & Pandian, Ravi S., 2012. "What U.S. data should be used to measure the price elasticity of demand for alcohol?," Journal of Health Economics, Elsevier, vol. 31(6), pages 851-862.
    8. J. Williams & Rosalie Liccardo Pacula & Frank J. Chaloupka & Henry Wechsler, 2004. "Alcohol and marijuana use among college students: economic complements or substitutes?," Health Economics, John Wiley & Sons, Ltd., vol. 13(9), pages 825-843.
    9. Carpenter, Christopher, 2004. "How do Zero Tolerance Drunk Driving Laws work?," Journal of Health Economics, Elsevier, vol. 23(1), pages 61-83, January.
    10. Cook, Philip J. & Moore, Michael J., 1994. "This Tax's for You: The Case for Higher Beer Taxes," National Tax Journal, National Tax Association, vol. 47(3), pages 559-73, September.
    11. Koenker, Roger, 2004. "Quantile regression for longitudinal data," Journal of Multivariate Analysis, Elsevier, vol. 91(1), pages 74-89, October.
    12. Wedel, M, et al, 1993. "A Latent Class Poisson Regression Model for Heterogeneous Count Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 397-411, Oct.-Dec..
    13. Coate, Douglas & Grossman, Michael, 1988. "Effects of Alcoholic Beverage Prices and Legal Drinking Ages on Youth Alcohol Use," Journal of Law and Economics, University of Chicago Press, vol. 31(1), pages 145-171, April.
    14. Sara Markowitz & John Tauras, 2009. "Substance use among adolescent students with consideration of budget constraints," Review of Economics of the Household, Springer, vol. 7(4), pages 423-446, December.
    15. Joseph J. Sabia, 2010. "Wastin’ Away In Margaritaville? New Evidence On The Academic Effects Of Teenage Binge Drinking," Contemporary Economic Policy, Western Economic Association International, vol. 28(1), pages 1-22, January.
    16. Sara Markowitz & Michael Grossman, 1998. "Alcohol Regulation And Domestic Violence Towards Children," Contemporary Economic Policy, Western Economic Association International, vol. 16(3), pages 309-320, July.
    17. Michael Grossman & Sarah Markowitz, 2005. "I Did What Last Night? Adolescent Risky Sexual Behaviors and Substance Abuse," Eastern Economic Journal, Eastern Economic Association, vol. 31(3), pages 383-405, Summer.
    18. Michael Grossman & Frank J. Chaloupka & Henry Saffer & Adit Laixuthai, 1993. "Effects of Alcohol Price Policy on Youth," NBER Working Papers 4385, National Bureau of Economic Research, Inc.
    19. Chou, Shin-Yi & Grossman, Michael & Saffer, Henry, 2006. "Reply to Jonathan Gruber and Michael Frakes," Journal of Health Economics, Elsevier, vol. 25(2), pages 389-393, March.
    20. 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.
    21. Lamarche, Carlos, 2011. "Measuring the incentives to learn in Colombia using new quantile regression approaches," Journal of Development Economics, Elsevier, vol. 96(2), pages 278-288, November.
    22. Chaloupka, Frank J & Saffer, Henry & Grossman, Michael, 1993. "Alcohol-Control Policies and Motor-Vehicle Fatalities," The Journal of Legal Studies, University of Chicago Press, vol. 22(1), pages 161-186, January.
    23. Jeff DeSimone, 2010. "Drinking and academic performance in high school," Applied Economics, Taylor & Francis Journals, vol. 42(12), pages 1481-1497.
    24. DeSarbo, W.S. & Wedel, M., 1993. "A Review of Recent Developments in Latent Class Regression Models," Papers 521, Groningen State, Institute of Economic Research-.
    25. 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.
    26. Lamarche, Carlos, 2010. "Robust penalized quantile regression estimation for panel data," Journal of Econometrics, Elsevier, vol. 157(2), pages 396-408, August.
    27. Brent D. Mast & Bruce L. Benson & David W. Rasmussen, 1999. "Beer Taxation and Alcohol-Related Traffic Fatalities," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 214-249, October.
    28. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    29. 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.
    30. Saffer, Henry & Grossman, Michael, 1987. "Drinking Age Laws and Highway Mortality Rates: Cause and Effect," Economic Inquiry, Western Economic Association International, vol. 25(3), pages 403-417, July.
    31. Deb, Partha & Trivedi, Pravin K, 1997. "Demand for Medical Care by the Elderly: A Finite Mixture Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(3), pages 313-336, May-June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vinish Shrestha & Sara Markowitz, 2016. "The Pass-Through Of Beer Taxes To Prices: Evidence From State And Federal Tax Changes," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1946-1962, October.
    2. Grant, Darren, 2016. "A structural analysis of U.S. drunk driving policy," International Review of Law and Economics, Elsevier, vol. 45(C), pages 14-22.
    3. repec:kap:reveho:v:16:y:2018:i:2:d:10.1007_s11150-016-9337-x is not listed on IDEAS
    4. repec:eee:socmed:v:191:y:2017:i:c:p:176-185 is not listed on IDEAS

    More about this item

    Keywords

    health economics; economics; health; alcohol; young adults.;

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • J1 - Labor and Demographic Economics - - Demographic Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:amjhec:v:1:y:2015:i:2:p:224-254. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ann Olson). General contact details of provider: https://www.mitpressjournals.org/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.