If alcohol is too cheap (see this post), then the two main policy options that the government has is to increase alcohol excise tax (which would increase the price of all alcoholic drinks), or to introduce a minimum unit price (which would increase the price of cheap alcoholic drinks, but probably leave more expensive options unchanged in price). Which is better?
On that topic, I just read this 2010 article (open access) by Robin Purshouse (University of Sheffield) and colleagues, published in the prestigious median journal Lancet. They constructed a complex simulation model from cross-sectional consumption survey and alcohol purchase data (differentiating between on-premise and off-premise purchases, and type of beverage), as well as health data, for England. Importantly, they disaggregate the effects of changes in price on groups based on the level of drinking: moderate (including non-drinkers); hazardous; and harmful. This seems to me to be one of the most thorough exercises of this type that I have seen. The most obvious flaw is the use of cross-sectional data, where longitudinal data would provide better estimates of the own-price and cross-price elasticities of the various beverage types.
They investigate a wide range of pricing policies, with different levels of change in price. Their model allows them to estimate the effects on alcohol consumption (based on own-price and cross-price elasticities), and the effects on health care costs (based on health economic models) and health gains measured in Quality-Adjusted Life Years (QALYs; based on econometric models linking consumption to alcohol-attributable medical conditions). Their findings are most easily summarised in Figure 1 from the article:
Unsurprisingly, within any type of policy, larger increases in price have more positive effects. However, the more interesting result is comparing across different policies. Purshouse et al. find that:
...notable between-policy differences exist. For example, a £0·45 minimum price would be more effective overall than a 10% general price increase, but is achieved with a much lessened effect on moderate drinkers’ spend and larger increases in spend for harmful drinkers. This differential effect arose because minimum price policies target cheap alcohol products, which make up a higher proportion of the average selection of alcohol purchases for heavier drinkers than for moderate drinkers.
So, policies that have the same overall effect on alcohol consumption can have very different effects in terms of reducing alcohol-related harm. My takeaway from the results overall is that it appears that minimum unit prices work better than increasing prices across-the-board through excise tax increases. This would accord with other research, although it is not a reason to discard excise taxes entirely.
Understanding the effects of potential policy options is important. In Purshouse et al.'s discussion of their results, they make what seems to me to be a really important point:
For policy makers, a balance between reduction in health harms and increased consumer spending might be important for proportionality, and one implication of our study is that minimum pricing strategies might help achieve this balance. For example, a general 10% price rise is estimated to reduce consumption by 4·4% and alcohol-related harm by £3·5 billion over 10 years, but a minimum price of £0·45 could produce a similar overall consumption effect, while achieving greater reductions in harm and a rebalancing of spending effect away from moderate drinkers towards heavier drinkers.
So often, public health researchers ignore the trade-offs inherent in their policy recommendations, or lack any sense of the proportionality of those recommendations. The sort of simulation exercise that Purshouse et al. conducted allows for quite a deep exploration of various pricing policy options. They make the point that their modelling approach can be used as a template for other countries. It would be great to pull together something like this for New Zealand, which might provide the evidence to support minimum unit pricing here.
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