The latest NZMJ has a couple of pieces on alcohol minimum pricing.
The editorial from British Columbia researcher Tim Stockwell lauds minimum pricing’s successes in BC, though I think he there overstates the case – especially where some of his own work in British Columbia makes a hash of things by using regional CPI within B.C. to get differences in the real value of the province-wide minimum alcohol price.
I’m pretty sure that you can’t induce panel variation in your main regressor of interest by just dividing that constant by the varying regional CPI. That’s probably one of those things that ,robust won’t fix.
The new New Zealand evidence comes from a survey of just over a hundred heavy drinkers. The Science Media Centre asked me for comment on that part; my comments are copied below.
“Minimum alcohol pricing has the potential to mitigate harms from heavy drinking at lower cost than across-the-board excise increases. However, we need to be cautious about the potential effects.
“The Falkner et al study surveys heavy drinkers to ask them what they might do were they faced with higher alcohol prices. Thirty percent of those drinkers who have previously faced situations in which they could not afford alcohol reported having turned to illicit or prescription drugs when they could not afford alcohol; the authors note this may be an underestimate since their survey excluded drinkers who had reported co-morbid drug use. Pricing heavy alcohol users out of alcohol, for some users, will result in shifting to other substances. Net effects on harms are then less clear.
“Byrnes et al (2013), in Australian data, reported that heavy drinkers did respond to price hikes by curbing consumption, but that they did so by cutting back consumption on their lower drinking days. Heavy drinking was not affected. This will have health benefits, but smaller benefits than you might expect if you had expected that drinking on heavy drinking days would be as strongly affected. In this case, the health benefits of minimum alcohol prices may be overestimated if heavy drinkers respond to price increases by saving up to maintain binge days.
“Minimum alcohol pricing at $1 per unit would require that, for example, no standard bottle of wine be priced at less than $8 to $9 dollars. While this would affect heavier drinkers who may otherwise downshift in quality in response to excise changes, it would also affect lower income moderate drinkers. Benefits in reducing harmful drinking among harmful drinkers need be weighed against the costs imposed on moderate lower income drinkers – and especially where moderate drinkers are far more responsive to price hikes than are heavier drinkers (Wagenaar et al, 2009). We also need to note that while the survey asked heavy drinkers, who were predominantly lower income, how much they paid on average per standard drink, the survey did not ask moderate or light drinkers of lower income what they pay for their preferred product.
“While survey respondents indicated that they had not turned to informal alcohol supply, or home brewing, in response to previous instances of not being able to afford alcohol, sustained alcohol unaffordability might induce different behavioural responses. For example, one person setting up a distillation unit could easily informally supply neighbours at far less cost than either minimum prices or current alcohol cost. When alcohol prices are high enough, the investment in distillation kit, or even simpler fermentation, can become worthwhile. Were minimum pricing implemented, the government might wish to undertake better tracking of informal alcohol supply.”
“Policy in this area needs to weigh carefully the potential benefits of some drinking reduction among heavy drinkers against the harms imposed on poorer lighter drinkers.”
Declared conflicts of interest: The Initiative is a member-funded think tank. Its members include many of New Zealand’s leading corporations, including one in the alcohol industry and a retail grocery chain. While in the Department of Economics and Finance at the University of Canterbury, Dr Crampton’s work was partially funded by the Brewers Association of Australia and New Zealand. He maintains his academic independence. He also is a moderate consumer of alcohol.
I might also note that if there’s a case for minimum alcohol pricing, it’s also a case for reducing the existing excise levy.
- Minimum pricing
- Minimum alcohol pricing and economic rents
- Markets hate profits: minimum pricing edition
- Petrol tax:speeding :: alcohol tax:binge drinking
- Increasing excise is great, if you assume the right things
- The Omniscience Constraint
- Public health and the regulatory state
- Minimum pricing
- Minimum prices and mortality risk
- Evidence and minimum pricing
- About that Canadian study…
- Alcohol minimum pricing
- A hopefully concluding note on the price elasticity of alcohol
- Seeing what you want to see – minimum pricing edition