Alcohol Pricing And Consumption And Alcohol Related Harm Economics Essay

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Alcohol is regarded as an important product for any country contributing to its economy, serving as a means of leisure and socialisation to the population and having some beneficial effects on health.1 But at the same time alcohol is also regarded as the root cause of multiple health and safety issues and crimes, increasing the burden on the society. The number of alcohol related deaths in the UK has increased from 6.7/100,000 in 1992 to 12.8/100,000 in 2009.2 The rate of alcohol-related admissions (NI39) for England in 2009/10 was 1,743/100,000, which showed a 10% increase from 2008/09 statistics. 3 Further, it is estimated that this rate in the first two quarters of 2010/11 will be about 942/100,000, predicting a 9% further increase.4 In addition, there was an average of 271 prescription items prescribed for alcohol dependency in England per 100,000 in 2009 costing the National Health Service about £2.38 million.5 Hence, we can see that the burden of alcohol misuse in England is huge, making it a priority problem in public health.

According to the law of demand, the demand of a product is inversely proportional to its price, which means that increase in the price would decrease the demand and vice-versa. Alcohol now is 70% more affordable than it was in 19805, which may be related to increasing alcohol misuse. Therefore, pricing has been regarded as one of the central tools in alcohol policy.6 On 18th January 2011, the government set a minimum price of alcohol for England and Wales7 following which there has been a lot of discussion on the effects of alcohol price, consumption and related harm. Hence this paper aims to review the current literature to investigate the association between alcohol price, consumption and alcohol related harm.

Identification of epidemiological evidence -Literature Search

Literature search was done using the database of MEDLINE (1954-present) and the Google Scholar search engine. In addition, the relevant reports published in the UK were also identified and included in the review.


Fig. 1

Literature Search on MEDLINE

Note: '+' denotes Boolean Operator 'AND' & '/' denotes 'OR' Four main terms searched for included 'Alcohol pricing', 'Alcohol', 'Consumption' and 'Pric*' where '*' indicates truncation to include all forms of the root word. All the terms were searched for in the title of the articles and not as keywords to obtain very specific results. 20 articles were obtained that were relevant to the topic after excluding articles in languages other than English and articles older than 2000 i.e. more than 11 years old. Figure 1 gives the results retrieved for each term and sequence of combinations to obtain the final 20 articles.

Google Scholar

Literature was searched on the Google Scholar search engine using the phrase 'Alcohol tax and pricing'. About 15 articles were found with relevant titles to the topic. After excluding the articles older than 2000, a total of 13 articles were included.

Relevant published Reports

The commissioner of alcohol services at the Derby Alcohol Action team discussed the University of Sheffield Report on alcohol pricing. In addition, a latest report by the Home Office on likely impacts of increasing alcohol price was also discussed by a colleague working for the Department of Health. Hence, these reports were also included in the review. Another review by Centre for Economic and Business Research was also found. However, it was included from the analysis as it was commissioned by SABMiller plc. Therefore, it was subject to bias and interpreted alcohol pricing as a fruitless intervention.

Fig 2

Literature Search StrategyThus, a total of 21 articles were included in this review. Fig. 2 describes the overall search strategy adopted.

Review of evidence

Effects of alcohol pricing and taxation on consumption

It has been highlighted in the literature that alcohol pricing related closely to alcohol consumption and with increasing alcohol prices the demand for alcohol decreases. 38 of 72 studies in a systematic review highlighted that alcohol consumption is inversely proportional to the price.8 The elasticity (measure of change in demand with the change in price) for beer in the study was -0.5, which means that with a 1% increase in price beer consumption with decrease by 0.5%. The elasticity of wine was -0.79.8 Another review found similar results with elasticity of -0.46 for beer, -0.69 for wine and -0.80 for spirits. Furthermore, it found a significant relationship (p<0.001) between alcohol price measures and indices of alcohol sales or consumption(r = -0.44).9

Individual epidemiological studies in different countries have also demonstrated this inverse trend. A study in Finland evaluated this relationship by studying the alcohol consumption from 1982-2008. In 2004 alcohol prices in Finland decreased by 1/3rd. This resulted in an increase of alcohol consumption especially in the 45-64 years age group and people with low levels of education.10 Similar results were found in a longitudinal study in Switzerland pre-post alcohol tax reforms. They concluded that spirit consumption significantly increased by 28.6% in the study sample with the decrease in prices, even after adjusting for significant correlates of spirit consumption. 11 12 However, consumption of wine, beer or overall alcohol did not change significantly. 12 This finding is consistent with findings of a study done in Denmark, Finland and Southern Sweden after alcohol tax changes. Alcohol consumption in Denmark and Sweden decreased with a decrease in alcohol tax. In contrast, there was no change in consumption of alcohol in Southern Sweden following tax changes. 13 This study was a large study based on the data from 3 countries and it found contradictory results. However, it is important to note that it was a cross-sectional study, which could be subject to reporting bias. Further, there might be a high-rate of consumption in homeless or unemployed people who may not be included in the sample. One more factor could be the increase in imports during the study period, which may lower the sales of alcohol in the country.

There is a lack of epidemiological studies in the UK on this issue however data exists on economic modelling and independent reviews. Purshouse and colleagues developed an economic model around alcohol pricing policies which shows that a 10% increase in alcohol price may decrease the consumption by 4.4%.14 The Sheffield group(2008) and the Home Office (2011) reviews also support these findings that increase in price is related to decrease in consumption.15 16

Who benefits the most?

Studies show that harmful drinkers are expected to reduce their consumption the most with increasing price14 15 17 with an average elasticity of -0.28 (p<0.01). 9 However, Meier and colleagues assert that moderate drinkers (elasticity -0.47) are more price sensitive than heavy drinkers (elasticity -0.21). 18 This may have important implications as 45% of the alcohol is consumed by the 10% of the heavy drinkers. 18Moreover, these findings indicate that increasing the price of alcohol would not have a major impact on light and occasional drinkers, which is a constant argument from the alcohol industry. It has been indicated that a 10% alcohol price rise decreases weekly consumption in 11-18 age group by 5.3% and 18.24 age-group hazardous drinkers by 6%. Other literature also suggests that younger people are more elastic to changes in price than older people and may decrease their consumption with price increase.11 13 15 19 This can reduce the disproportionately high incidence of alcohol related problems such as road traffic accidents in this group.19

Quality-Quantity trade-off - Switching to cheaper alcohol

Literature also points out that with increasing alcohol prices consumers may not reduce their intake but switch brands and venues and trade quantity for quality. 18 20 This consumer behaviour was observed in a study done in Germany where alcopop (sweetened, spirit-based drinks) consumption declined with an increase in tax but was substituted by sprits. In order to avoid this switching behaviour it is important to regulate the costs of alcohol overall, such as in Canada instead of regulating isolated beverages. In addition, it is imperative to consider population heterogeneity and also take into account the addictive nature of alcohol, when planning for any cost related intervention.

Association between pricing and alcohol-related harm

A study done in Florida on the effects of alcohol taxes points out that 69 deaths could be saved/ month with 1 unit increase in alcohol tax(p=0.007) with elasticity estimate of -0.22 (p=0.06). On the other hand Finland encountered 16-31% increase in alcohol disease mortality with major decreases in tax. 21 A systematic review on effects of tax on morbidity and mortality found a negative effect of alcohol price on alcohol related diseases and injury outcomes (r=-0.347), violence (r=-0.22), suicide (r=-0.48), traffic crash outcomes (r=-0.112), sexually transmitted diseases (r=-0.055), other drug use (r=-0.022) and crime (r=-0.014). 22 Another U.S. study points out that $1 increase in spirit tax may reduce the incidence of Cirrhosis by 5.4% (p<0.05) and a one cent increase in taxes per ounce of alcohol would reduce the sales by 2.1% and 0.483% reduction in all-cause mortality rates (p<0.05).8 In addition, it also showed a reduction in rates of rapes, robbery, homicides and any violence towards children. 8 It is estimated that a 10% increase in alcohol price will reduce hospital admissions by 10,100 and deaths by 232 per annum. Direct crime costs may also be reduced by £70m/ annum.23 All these costs saved and increased revenue may then be utilised in other program to decrease alcohol related harm. 8

Bias, Confounding and Limitations

While most of the literature discussed in this review highlights positive findings of alcohol pricing and consumption, it is important to note that this review involved a limited number of databases. There may be a room to identify more studies if more databases such as ISI Web of Science, ScienceDirect and EMBASE etc were searched. There may also be alot of grey literature relevant to the topic which was not identified. Government reports have been included in the review, which is strength of this review. Furthermore, most of the studies discussed are either reviews, cross-sectional studies or time-series analysis with limited longitudinal studies and natural experiments. Some studies may also have ecological fallacy as they compare trends between different countries and therefore the results may not extrapolate at an individual level. The author also acknowledges that measurement of alcohol consumption is a complex issue and there may be errors in measurement, under-estimation or under-reporting of consumption, under-representation of the consumers and the best proxy measure may not have been taken for consumption indices. Additionally, with cross-sectional studies there is a high chance of reporting and recall bias, which might be an issue with some studies and impact the overall quality of the review. There may also be a problem in generalisability and transferability of findings as each country differs socially, economically and politically. There may also be multiple confounders in the association presented such as increase in imports when the price goes up and anti-alcohol environment in the region which may explain some of the effect and which have not been discussed in detail. Lastly, it is also important to acknowledge that alcohol pricing is just one factor in alcohol consumption and there may be several other individual, social, cultural and behavioural factors that may need to be looked at, in order to decrease alcohol misuse.


The upward slope of alcohol related harms calls for immediate effective interventions to curb this issue. In light of the literature above alcohol price can greatly modulate the alcohol consumption and reduce alcohol related harm especially in the harmful and hazardous young drinkers. Hence, it can be a vital policy lever to control alcohol misuse and alcohol related harm in the country. The minimum pricing policy introduced in January is just once aspect of it, which will control the below-cost selling of alcohol. However, policies around alcohol use need to be stringent in order to reduce the societal harm. In addition, minimum pricing alone is not the solution; Alcohol misuse is a very complex problem and needs multi-faceted interventions to combat with it. There should be other equally effective interventions in the sectors of health promotion, health protection and treatment sector in order to deal with this problem effectively. Furthermore, in economic and political terms other policies related to alcohol pricing such as targeted taxation, taxation based on volume etc, also need to be considered.