Understanding Heterogeneity In Price Elasticities In The Demand For Alcohol For Older Individuals

TitleUnderstanding Heterogeneity In Price Elasticities In The Demand For Alcohol For Older Individuals
Publication TypeJournal Article
Year of Publication2013
AuthorsAyyagari, P, Deb, P, Fletcher, JM, Gallo, W, Sindelar, JL
JournalHealth Economics
Volume22
Issue1
Pagination89
KeywordsHealth Conditions and Status, Methodology, Other, Public Policy
Abstract

This paper estimates the price elasticity of demand for alcohol using Health and Retirement Study data. To account for unobserved heterogeneity in price responsiveness, we use finite mixture models. We recover two latent groups, one is significantly responsive to price, but the other is unresponsive. The group with greater responsiveness is disadvantaged in multiple domains, including health, financial resources, education and perhaps even planning abilities. These results have policy implications. The unresponsive group drinks more heavily, suggesting that a higher tax would fail to curb the negative alcohol-related externalities. In contrast, the more disadvantaged group is more responsive to price, thus suffering greater deadweight loss, yet this group consumes fewer drinks per day and might be less likely to impose negative externalities. Copyright 2011 John Wiley and Sons, Ltd.

Endnote Keywords

Alcohol/Price elasticity/alcohol taxation/Public Policy/Elasticity of demand/heterogeneous policy responses/Fiscal policy/Fiscal policy/latent groups

Endnote ID

69734

Citation Key7917
PubMed ID22162113
PubMed Central IDPMC3641566