Estimating effects of alcohol tax increases on highway fatalities

Estimating effects of alcohol tax increases on highway fatalities

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    There can be no doubt that tax increases which raise the price of all alcoholic beverages will reduce the overall consumption of alcohol which in turn will reduce highway accidents and fatalities. Both theoretical reasoning about the effects of tax increases and empirical investigations give evidence of a causal relationship between higher alcoholic beverage prices and accidents. The issue then becomes one of magnitude: How much of a reduction in accidents canbe presently expected for any given amount of tax? The question can be approached in two basic ways: reasoning theoretically and more directly through empirical studies. The theoretical method attempts to reason about the path any tax increase must take in ultimately reducing accidents and fatalities. Three links are crucial in this path if a strong response is to be expected: (1)the alcohol tax at the supply level must be effective in raising the retail price; (2) the tax-induced higher retail price must reduce consumption; (3) the consumption that is reduced must be that which is involved in alcohol-related crashes. Some of the information about these links can be reasoned from economic theory and from studies not directed specifically toward highway safety. The empirical approach is more direct in trying to establish statistical relationships among historical state tax changes and reductions in highway fatalities.
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