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youth and young adults.1 Given the size and scope of the economic literature on alcohol use and its consequences, this review does not claim to be comprehensive, but instead highlights key studies and the general conclusions that emerge from these and other studies not described in detail.

Public Policies and Alcoholic Beverage Prices

Federal, state, and local governments have adopted a wide variety of public policies with the intent of reducing the consequences of alcohol use and abuse. Many of these policies impact the “full price” of alcoholic beverages. In the context of economic research on alcohol, “full price” includes not only the monetary prices of alcoholic beverages, but also many other “costs” associated with drinking and related behaviors. Two other costs most commonly included in this research are the time costs associated with obtaining alcoholic beverages and the expected legal costs associated with drinking and related outcomes. This review, however, will focus on policies that impact the monetary prices of alcoholic beverages.


Of the policies directly influencing the prices of alcoholic beverages, excise taxation is the most widely employed. The popularity of alcoholic beverage taxation is largely due to the revenue-generating potential of these taxes, although public health arguments supporting increased beer, wine, and spirits taxation have been used more frequently in recent years. Most alcohol excise taxes are specific taxes applied based on the quantity or volume of a given alcoholic beverage.

Federal alcoholic beverage taxation. Federal excise taxes on alcohol date back to the late eighteenth century and have been raised over time, most often to generate new revenues during wartime.2 Over the past half-century, however, federal excise taxes on alcoholic beverages have been increased infrequently, with the most recent increases aimed at reducing gov-


This chapter draws heavily on several recent reviews, including Chaloupka, Grossman, and Saffer (1998, 2002), Cook and Moore (2000, 2002), and U.S. Department of Health and Human Services (DHHS) (2000).


See the Bureau of Alcohol, Tobacco, and Firearms Web site ( for a detailed history of federal alcoholic beverage excise taxes and for examples of the increases in these taxes during the U.S. Civil War, both World Wars, and the Korean War.

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