An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels

Michael Grossman, Frank Chaloupka and Ismail Sirtalan

No 5200, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper aims to refine and enrich the empirical literature dealing with the sensitivity of alcohol consumption and excessive consumption to differences in the prices of alcoholic beverages. The main refinement pertains to the incorporation of insights provided by a model of rational addictive behavior which emphasizes the interdependency of past, current, and future consumption of an addictive good. The data employed in this study consist of a U.S. panel whose members range in age from seventeen through twenty-seven. Since the prevalence of alcohol dependence and abuse is highest in this age range, addictive models of alcohol consumption may be more relevant to this sample than to a representative sample of the population of all ages. We find that alcohol consumption by young adults is addictive in the sense that increases in past or future consumption cause current consumption to rise. The positive and significant future consumption effect is consistent with the hypothesis of rational addiction and inconsistent with the hypothesis of myopic addiction. The long-run elasticity of consumption with respect to the price of beer is approximately 60 percent larger than the short-run price elasticity and twice as large as the elasticity that ignores addiction.

JEL-codes: J10 (search for similar items in EconPapers)
Date: 1995-07
Note: EH
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Published as Economic Inquiry, Vol. 36, no. 1 (July 1998): 39-46.

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Journal Article: An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels (1998)
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