Citation

Young D. Transp. Res. Circular 2007; 2007(E-C123): 31-47.

Copyright

(Copyright © 2007, U.S. National Academy of Sciences Transportation Research Board)

DOI

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PMID

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Abstract

How do alcohol beverage prices affect traffic fatalities? Economic theory predicts that alcohol consumption will be negatively related to price, and thus increases in price are expected, ceteris paribus, to reduce alcohol-related fatalities. Furthermore, price is an important policy variable, because it is affected by taxes and other policies, and -- for some beverages in some states -- price is actually set by alcohol control authorities. Schematically, the hypothesized relationships are: tax = > price = > consumption = > fatalities. While there is little dispute about the qualitative nature of these relationships, there is a wide range of quantitative estimates of the magnitudes involved at each step, and a further question about whether, taken together, the estimated magnitudes make sense. Many researchers in the United States have estimated reduced-form relationships based on state-level tax and fatality data, ignoring the intermediate relationships between taxes and prices, prices and consumption, and consumption and fatalities. Studies based on data from the 1970s and early 1980s often found a large, statistically significant negative relationship between state alcohol taxes and fatalities. However, several studies in the late 1990s failed to find significant relationships, and found that the estimates were sensitive to what other variables were included, or were implausible. A large number of studies have addressed the relationship between alcohol consumption and price, but only a few are focused on the high levels of intoxication associated with most alcohol-related fatalities (Simpson et al., 2004). The few studies that estimated a price-fatality relationship yielded inconsistent results. However, two recent studies have demonstrated that the failure to detect a robust and statistically significant relationship between beverage prices and fatalities may result from the poor quality of the available price data. Even after correcting for measurement error, however, substantial uncertainty remains about the true magnitude of price effects. Section II of this paper provides an overview of trends in U.S. traffic fatalities, alcohol consumption, and beverage pricing. Section III reviews a number of studies relating fatalities to beer taxes. Section IV considers whether the available tax or price data are better indicators of the price of alcohol. Section V discusses two recent studies utilizing price data and section VI presents conclusions.