Key points are not available for this paper at this time.
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.
Vinish Shrestha (Sun,) studied this question.