Drinking behavior during the Icelandic economic boom, crisis, and recovery

Abstract

Alcohol consumption, in particular excessive alcohol consumption, imposes high costs on societies through consequences, such as lost productivity, early mortality, health-care costs, car accidents and crime. The main objective of this study is to examine how drinking behavior developed over an economic boom, subsequent crisis, and an eventual recovery. We use individual longitudinal data collected through a postal survey by The Directorate of Health in Iceland in 2007, 2009, and 2012. Pooled OLS and linear probability models are used to study four outcomes: Alcohol-consumption frequency, frequency of binge drinking, binge-drinking participation and alcohol dependence. Alcohol-consumption frequency declined during the crisis, with a further decline during the recovery period. This change is driven by female behavior between 2007 and 2009, but a combined gender effect between 2009 and 2012. This effect is suppressed by male labor-market-changes, but partly mediated by labor marked changes in the case of females. Alcohol dependence declined during the crisis, with suggestive evidence of partially reverting back to previous levels during the recovery. There is some indication that during the crisis real price changes of alcohol played a role in the decline in alcohol consumption but that is not a likely determinant of changes in alcohol consumption for the 3 year period post-crisis that we explore. Men’s consumption can partly be explained through income changes while women’s consumption changes are rather driven by changes in work hours or other factors.

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Fig. 1

Notes

  1. 1.

    Ruhm (2000) estimates that one-percentage point higher unemployment rate leads to 0.5% lower mortality rate. Using aggregate data for 23 countries Gerdtham and Ruhm (2006) find that one percentage point decrease in national unemployment rate is related to 0.4% higher total mortality, especially applying to countries with low social protection.

  2. 2.

    Economy-related stressors is referred to in Richman´s et al. paper as an instrument developed in their study: Life Change Consequences of the Great Recession, which includes 7 categories; (1) Home Ownership Problems, (2) Undesirable Living Situation, (3) Problematic Employment Situation, (4) Unemployment or Underemployment, (5) Inadequate Health Insurance, (6) Social Role Constraints and (7) Inadequate Sick Time.

  3. 3.

    Although prices can be affected by changes in the labor market, e.g. through wages, it is unlikely that such effects would play a large role in explaining the price increase in alcohol during the period between 2007 and 2009. That price change is predominantly explained by the devaluation of the Icelandic krona as a result of the economic collapse in 2008. If a reduction in wages did lower prices, then the effect of the currency shock is underestimated. In that sense our point estimates for year 2009 and 2012 would be considered conservative.

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Acknowledgements

We are grateful for funding from the University of Iceland Research Fund and the Icelandic Research Fund (IRF grant number 130611-052). We also thank the Directorate of Health in Iceland for providing the data.

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Correspondence to Tinna Laufey Asgeirsdottir.

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Asgeirsdottir, T.L., Bjornsdottir, A.T. & Ólafsdóttir, T. Drinking behavior during the Icelandic economic boom, crisis, and recovery. Rev Econ Household 15, 1191–1213 (2017). https://doi.org/10.1007/s11150-017-9367-z

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Keywords

  • Alcohol
  • Business cycles
  • Iceland
  • Drinking behavior
  • Crisis

JEL Classifications

  • I10
  • I12
  • I15
  • E20