THE ROLE OF PRICE IN THE DEMAND FOR ALCOHOL

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In recent years, a number of strategies have been proposed to reduce the heavy economic and human costs of alcohol abuse and alcoholism. One recent study suggests that current taxes are not sufficient to cover the costs that alcohol abusers impose on others. A number of studies conducted over the last fifteen years suggest that drinking is sufficiently price responsive to suggest that raising price would be an effective way of reducing overall consumption. Thus raising taxes could reduce the implicit subsidy to drinking and reduce the alcohol related social costs. However, little work has focused on the issue of whether increased proces reduce heavy or light consumption, because most of this work has used data aggregated to the state or national level. Since heavy consumption, along with drunk driving, are of greatest concern, it is important to know how taxes and prices affect heavy consumption and the patterns of consumption.] This grant will examine the price responsiveness of the demand for alcohol, and whether heavy drinkers are less sensitive to price than light or moderate drinkers. The study will use data from a supplement on alcohol and health practices to the 1983 National Health Interview Survey.