Working Paper: NBER ID: w30097
Authors: Henry Saffer; Markus Gehrsitz; Michael Grossman
Abstract: The alcohol industry argues that alcohol excise taxes do not reduce heavy drinking because of substitutions to lower-cost products and that these taxes disproportionately burden low-income drinkers. Alternatively, some economists have argued that increases in alcohol excise taxes reduce heavy alcohol consumption. Using data from the Nielsen Homescan we investigate the effects of a large excise tax increase that raised alcohol prices. The results show that heavy drinkers reduce purchases, and this reduction is no different than the reductions by other drinkers. The results also show that only low-income drinkers pay more for ethanol after the tax increase.
Keywords: Alcohol excise tax; Heavy drinking; Low-income drinkers
JEL Codes: H20; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| alcohol excise tax increase in Illinois (H29) | reduction in alcohol purchases among heavy drinkers (H27) |
| alcohol excise tax increase in Illinois (H29) | reduction in alcohol purchases among other drinkers (H27) |
| alcohol excise tax increase in Illinois (H29) | increase in prices paid for ethanol by low-income drinkers (P22) |
| reduction in alcohol purchases among heavy drinkers (H27) | reduction in alcohol purchases among other drinkers (H27) |