Alcohol Taxes and Labor Market Outcomes

Abstract:     
In this paper, we present estimates of the effect of alcohol taxes on employment, hours of work per week, and wages. These are reduced form estimates derived from a structural model linking alcohol use to labor market outcomes. The reduced form estimates are meaningful in two ways: first, they provide estimates of the effect of an important public policy tool, alcohol taxes, on labor market outcomes, and second, they can be used to evaluate hypotheses about the structural effects of alcohol use on labor market outcomes. The results of the analysis suggest that alcohol taxes are unrelated to employment, hours of work, and wages. Estimates of the effect of alcohol taxes on labor market outcomes were large and imprecise, and characterized by significant variation in sign and magnitude across samples and types of alcohol taxes. This suggests that there is a weak and indeterminate relationship between alcohol taxes and labor market outcomes. This finding implies that alcohol use does not adversely affect labor market outcomes and is inconsistent with findings from previous studies.

JEL Classifications: I1

Working Paper Series