Wednesday, March 24, 2010

Binge drinking, drink type and dangerous behavior

Like many Anglo-Saxon countries, Australia has a problem of too frequent binge drinking. In this context, a discussion emerge on how to tax alcoholic beverages in order to reduce binge drinking while still preserving "normal" drinking. While obvious education campaigns can influence behavior, in many cases prices are more effective. The question is then how to best design such a tax. One way to do it to tax uniformly the alcohol content, following the reasoning that it is the alcohol that induces damages and negative externalities.

Preety Srivastava and Xueyan Zhao claim this is not necessarily a good idea if the likelihood binge drinking varies by alcoholic beverage. Using survey data, they find that heavy bingers (more than three times a week) indulge on beverages with higher alcohol content. Also, the more frequently one binges, the more often on engages in risky behavior like drunk driving or swimming, property damage and physical abuse. Srivastava and Zhao even highlight bing drinking while pregnant and while breast feeding is frequent. Additionally, drinking is mostly done at home, thus outside the reach of potential controls in public places. All this points to a beverage tax that should be progressive in the alcohol content, not proportional as proposed in Australia. this assumes of course that drinkers are responsive to price changes and this responsiveness is not substantially weaker for binge drinkers.

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