Further evidence about alcohol consumption and the business cycle
The main goal of this paper is to test whether macroeconomic conditions affect alcohol consumption using data from the Behavioral Risk Factor Surveillance System for the period 1987-2003. We try to control unobserved heterogeneity by relying on the construction of pseudo-panel data from the different cross-sections available. Our results indicate that when we do not take into account unobserved heterogeneity, the unemployment rate is signifficant and reduces the probability of becoming drinker and the number of alcoholic beverages consumed. However, once we estimate the model using cohort data, controlling for both observed and unobserved heterogeneity, the unemployment rate becomes non-signifficant. This implies that unobserved effects are important when explaining alcohol consumption. As a result, inferences obtained without controlling for them should be interpreted with caution.
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