Pour Decisions: The Effects of Alcohol Privatization on Child Health and Safety

• In Event: From Taxes to Treatment: Policy Approaches to Substance Use and Maternal and Child Health

Abstract

Prior economics research has documented that alcohol availability and consumption affect downstream family formation and child health outcomes. Most of this evidence relies on price variation or changes in access; the former typically generates modest behavioral responses, while the latter is often targeted toward youth (e.g., minimum legal drinking age laws). This paper instead studies a large-scale, non-targeted change in alcohol availability: the privatization of liquor sales in Washington under Initiative 1183. 

Initiative 1183 eliminated the state retail liquor monopoly and allowed private retailers—including grocery stores—to sell spirits, substantially expanding access. This change increased overall liquor sales by roughly 16% (Seo, 2019). I use this policy shock to study impacts on infant health using restricted-use natality and fetal death data from the National Vital Statistics System. I organize the analysis into three sets of outcomes: (i) infant health at birth (e.g., low birth weight, preterm birth, APGAR scores), (ii) fertility margins (e.g., conception and birth rates, family composition), and (iii) heterogeneity across demographic and geographic groups. 

I exploit both within-state and cross-state variation in exposure. Within Washington, I construct a county-level exposure measure using liquor store locations. At the state level, I complement difference-in-differences estimates with a synthetic difference-in-differences approach to address concerns about aggregate trends. 

I find no statistically meaningful change in overall birth rates following privatization. However, teen birth rates increase by approximately 0.22 per 100,000 population, suggesting that expanded access may disproportionately affect younger populations. I also estimate a decline in average birth weight of roughly 11 grams, consistent with estimates from related quasi-experimental studies of alcohol exposure. 

I combine these reduced-form estimates with first-stage consumption responses to construct a partial externality measure. In a behavioral public finance framework, optimal alcohol taxation depends on demand elasticities, consumer bias, and marginal external costs. I map policy-induced changes in alcohol availability into birth and infant health outcomes, providing an input into the marginal external cost relevant for optimal taxation.

Author

• David M Hall, University of Oregon
  Presenting Author