Study Says Higher Alcohol Taxes Cut Youth Marijuana Use November 13, 1998
News Feature
Increasing the federal tax on beer would cut demand for alcohol among price-sensitive youths and lead to an even greater reduction in demand for marijuana, according to research published in the October, 1998 issue of the Journal of Health Economics.Researcher Rosalie Liccardo Pacula of the School of Business Administration at the University of San Diego said that youth don't substitute marijuana use for alcohol use, but rather use the two drugs in a complimentary fashion. Therefore, "Policies that increase the price of alcohol, such as increases in the beer tax, decrease the quantity of marijuana consumed by at least as much as alcohol consumption in percentage terms," wrote Pacula. "One implication of this study is that previous estimates of the optimal tax on alcohol may be understated because they ignore the decrease in marijuana consumption by young adults that is associated with higher alcohol prices."
Pacula noted that a 1992 study (DiNardo, J., Lemieux, T., 1992. Alcohol, marijuana and American youth: the unintended consequences of government regulation. National Bureau of Economic Research Working Paper No. 4212.) looked at data from the annual Monitoring the Future survey along with marijuana and beer price data, state decriminalization laws and state minimum drinking age, and concluded that increases in the drinking age between 1980 and 1989 reduced alcohol use but increased marijuana use. In 1994, other researchers (Chaloupka, F., Laixuthai, A., 1993. Do youths substitute alcohol and marijuana? National Bureau of Economic Research Working Paper No. 4662.) used price data to reach a similar conclusion -- that young people substituted alcohol use for marijuana, and vice-versa. Pacula disputed these findings, however, noting, for example, that past researchers erred in relating youth marijuana behaviors to the mere existence of state decriminalization statutes, rather than the level of enforcement of drug laws.
Pacula said that standard economic formulas to determine cross-price effect showed that doubling the beer tax would reduce the probability of using alcohol by 3.2 percent, but would also reduce the probability of using marijuana by 11.4 percent. "The main implication of this study is that government policy may be effective at reducing the demand for marijuana through its alcohol policies," wrote Pacula. "Findings from this study suggest that an increase in the federal tax on beer would generate a larger reduction in the demand for alcohol in percentage terms. This study also highlights the importance of considering cross-price effects when evaluating the optimal tax on legal substances."
The Pacula study was supported by a grant from the National Institute on Alcohol Abuse and Alcoholism.
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