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What happens to drinking when alcohol policy changes? A review of five natural experiments for alcohol taxes, prices, and availability

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Abstract

Natural experiments are an important alternative to observational and econometric studies. This paper provides a review of results from empirical studies of alcohol policy interventions in five countries: Denmark, Finland, Hong Kong, Sweden, and Switzerland. Major policy changes were removal of quotas on travelers’ tax-free imports and reductions in alcohol taxes. A total of 29 primary articles are reviewed, which contain 35 sets of results for alcohol consumption by various subpopulations and time periods. For each country, the review summarizes and examines: (1) history of tax/quota policy interventions and price changes; (2) graphical trends for alcohol consumption and liver disease mortality; and (3) empirical results for policy effects on alcohol consumption and drinking patterns. We also compare cross-country results for three select outcomes—binge drinking, alcohol consumption by youth and young adults, and heavy consumption by older adults. Overall, we find a lack of consistent results for consumption both within- and across-countries, with a general finding that alcohol tax interventions had selective, rather than broad, impacts on subpopulations and drinking patterns. Policy implications of these findings are discussed.

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Notes

  1. Three of 59 studies focus exclusively on imports [15–17], and are omitted here. Studies for several other countries provide results for alcohol-related harms, e.g., [18–22]; see [14]. We focus here on those natural experiments where a variety of methods are applied to diverse outcomes for consumption and drinking patterns, thus permitting both within- and cross-country comparisons by outcome, subpopulation, time period, etc.

  2. “Short-run” substitution refers to circumstances were the range of alternative substitutes is proscribed to those already known or otherwise permitted. Drinking-level “saturation” as used by Room et al. [11] is the notion that in some “mature” markets, potential demand is satisfied and individuals do not respond much to changes in prices, e.g., my personal demand for toothpaste does not vary. In this situation, substitution occurs mainly in the form of brand switching, including imports and unregistered consumption. Hence, market saturation will be associated with a price elastic demand for alcohol brands and an overall price inelastic demand for total alcohol.

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Acknowledgments

We wish to thank an anonymous reviewer for constructive comments that materially improved the paper. The usual caveats apply.

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  1. Pennsylvania State University, 609 Kern Building, University Park, PA, 16802-3306, USA

    Jon P. Nelson

  2. Centre Hall, PA, 16828, USA

    Amy D. McNall

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Correspondence to Jon P. Nelson.

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Research leading to this paper was supported in part by the International Alliance for Responsible Drinking, Washington, DC, a not-for-profit organization sponsored by major producers of alcohol beverages. This paper presents the work product, findings, viewpoints, and conclusions solely of the authors. Views expressed are not necessarily those of IARD or any of IARD’s sponsoring companies.

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Nelson, J.P., McNall, A.D. What happens to drinking when alcohol policy changes? A review of five natural experiments for alcohol taxes, prices, and availability. Eur J Health Econ 18, 417–434 (2017). https://doi.org/10.1007/s10198-016-0795-0

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