The Influence of Alcohol Consumption on Income and Health: Empirical Evidence from a Panel of OECD Countries

Abstract

Employing the panel data from 2001, 2003, and 2005 from 27 OECD countries, regression results suggest that income and a set of three indicators of health (that is, lung cancer mortality, mortality due to 14 kinds of cancers, and healthy life expectancy) are found to be related, thus implying that income and health may be one package in policy formulation. In this sense, expenditure on health care can be self-financing, at least partially. Increased government spending on health care results in improved health, which subsequently results in higher income and more government revenue. Evidently, the differences in alcohol consumption are causal to both income and health differentials. Given that the total income elasticity of moderate alcohol consumption is low, any alcohol taxes designed to dis- courage excessive drinking will result to welfare losses on drinkers who may not be imposing external costs by their drinking; higher prices are unfair on moderate drinkers (UK parliament, 2010). Education and campaigns implemented with the aim of influencing behavior such as anti-binge drinking programs will not only improve income (partially self- funding) but also health, as primarily intended.