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

50 Pages Posted: 13 Jul 2000 Last revised: 23 Sep 2010

See all articles by Michael Grossman

Michael Grossman

National Bureau of Economic Research (NBER), NY Office; CUNY The Graduate Center - Department of Economics

Frank J. Chaloupka

University of Illinois at Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Ismail Sirtalan

Greater New York Hospital Association

Multiple version iconThere are 2 versions of this paper

Date Written: July 1995

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.

Suggested Citation

Grossman, Michael and Chaloupka, Frank J. and Sirtalan, Ismail, An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels (July 1995). NBER Working Paper No. w5200. Available at SSRN: https://ssrn.com/abstract=225264

Michael Grossman (Contact Author)

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Frank J. Chaloupka

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Ismail Sirtalan

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