It has been argued that, because of the addictive nature of alcohol, price elasticities of alcoholic beverages may not be symmetrical (Bruun et al., 1975). In other words, a decrease of a certain magnitude in alcohol prices may have a greater impact on alcohol consumption than the same magnitude of price increase realized afterwards (see Box 6). Another reason for asymmetrical price elasticities could be that alcoholic beverages are so easily available that a further increase in alcohol availability will not increase alcohol consumption because the market is already saturated. Saturation has also been used as one explanation for the results in the Nordic alcohol tax study (Room et al., 2012).
Box 6. Alcohol tax changes in Finland in 2004–2010
In March 2004, Finland reduced its alcohol excise duty rates by an average of 33%. The motivation for this decrease was that in May 2004, Estonia, which had much lower alcohol prices than Finland, joined the EU. As quantitative quotas for travellers’ tax-free alcohol imports for own use from other EU member states had been abolished in January 2004, it was feared that private alcohol imports from Estonia would greatly reduce the amount of state-collected alcohol taxes as well as alcohol-related employment in Finland.
In 2005, total alcohol consumption per capita was 12% higher than in 2003. Despite the tax decreases, alcohol imports by travellers doubled between 2003 and 2005 and their share of total alcohol consumption rose to 17% in 2005. Meanwhile, domestic sales of alcoholic beverages increased. Despite a 7% increase in domestic alcohol sales from 2003 to 2005, the state collected 29% less excise duty on alcoholic beverages in 2005 than in 2003.
In 2008 and 2009, alcohol excise duty rates were increased three times, by an average of about 10% each time. Between 2007 and 2010, total alcohol consumption fell by 3% and alcohol imports by travellers rose by 11%. Despite the 7% decrease in domestic sales of alcoholic beverages between 2007 and 2010, the state collected 27% more alcohol excise duties in 2010 than in 2007.
These data show that consumption went up by 12% when taxes fell by 33% on average, but went down by only 3% when taxes went up about 30%, an example of asymmetry in elasticities.
The Nordic alcohol tax study dealt with Denmark, Finland and Sweden, which were all forced to abolish their quantitative quotas for travellers’ alcohol imports from other EU member states at the beginning of 2004 (Karlsson & Österberg, 2009). In order to combat increases in alcohol imports by travellers, alcohol excise duty rates for distilled spirits were reduced in Denmark in October 2003. In Finland, excise duty rates were decreased for all alcoholic beverages in March 2004 (Box 6). In Denmark, neither the alcohol sales statistics nor the survey data found an increase in total alcohol consumption and there were no clear increases in mortality or morbidity series. The picture was much the same for the effects in Southern Sweden where an increase in travellers’ alcohol imports from Denmark was expected (Room et al., 2012). Only in Finland was there found evidence of increases in alcohol consumption and related harm (Box 6).
Conclusions for policy and practice
Recent research evidence with regard to the economic availability of alcohol confirms previous knowledge and does not alter the fundamental conclusions of Bruun and colleagues in 1975. As Wagenaar and colleagues conclude their meta-analysis: “Results confirm previous reviews of
this literature, but extend results in important ways ... Price affects drinking in all types of beverages and across the population of drinkers from light drinkers to heavy drinkers”
(Wagenaar, Salois & Komro, 2009b).
The effects of prices as measured with price elasticities differ both across countries and different time periods as well as with regard to different categories of alcoholic beverage. These differences are related to the use values of alcoholic beverages and consumers’ preferences as well as the actual uses of such beverages. Local drinking habits should, therefore, be taken into account when alcohol policy measures that affect the economic availability of alcohol are planned.
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