Could Taxes on Alcohol Promote Economic Growth? - Pacific Standard

Could Taxes on Alcohol Promote Economic Growth?

All of those hangovers could be costing the country a lot of workdays.
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(Photo: Kellis/Shutterstock)

(Photo: Kellis/Shutterstock)

A healthy economy is a fast-growing one, at least according to conventional wisdom.

So what constrains this all-important economic expansion? Two economists think part of the explanation is a failing familiar to underachievers everywhere: too much beer drinking.

"The cost of drinking may indeed be borne by society as a whole."

Analyzing state-level data covering the years 1971 to 2007, including excise taxes levied on beer, the University of Connecticut's Resul Cesur and Inas Rashad Kelly of Queens College discovered an inverse relationship between the amount of suds quaffed and economic growth.

Writing in the journal Economic Inquiry, they point to such factors as lost workdays and lower productivity on the part of workers with hangovers, and suggest increases in alcohol excise taxes could promote economic growth by discouraging drinking.

“Our results,” they conclude, “suggest that the cost of drinking may indeed be borne by society as a whole.”

Sounds like the next round is on all of us.

This post originally appeared in the March/April 2014 issue of Pacific Standard as “Economic Gloom on Tap.” For more, subscribe to our print magazine.

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