Is youth alcohol consumption responsive to tax-induced changes in the price of alcohol? Previous economics research using the most credible fixed-effects methods has not reached consensus on this fundamental question, despite that tax-induced price increases may reduce a range of alcohol-related harms (such as mortality, morbidity, crime, and risky sexual behavior) if youth drinking is, indeed, price responsive. This project will use several recent large tax changes adopted by states over the past decade to address statistical limitations of previous research that has relied on infrequent and small increases in alcohol excise taxes to identify the relationship between youth drinking and tax-induced price changes. In so doing, we will provide direct evidence on the likely effectiveness of excise taxes as a strategy to reduce the adverse consequences of youth alcohol consumption.
Underage alcohol use is estimated to cost society over $50 billion annually in the form of traffic accidents, emergency room visits, and crime. Youth drinking may be reduced by increasing alcohol taxes, but previous research on this question is limited. This project will provide new evidence on the usefulness of excise taxes to reduce youth drinking and associated harms by using numerous large tax increases adopted since 2002 in response to state budget shortfalls.
|Carpenter, Christopher S; Mathes, Michael T (2016) New Evidence on the Price Effects of Cigarette Tax Competition. Public Finance Rev 44:291-310|