A micro-econometric analysis of alcohol prohibition in India
This thesis contributes to the understanding of alcohol prohibition by examining the causes and effects of prohibition policy in Indian states over 1957-2001. Chapter 2 examines the political economy of prohibition by using a state-level dataset to estimate the determinants of prohibition legislation. The analysis finds prohibition to be associated with the electoral cycle, legislature identity, lower relative strength of the alcohol industry, and the composition of state finances - in particular the share of central union excise. Chapter 3 focuses on the impact of prohibition on alcohol consumption using a series of cross sections of the National Sample Survey. Unit value analysis is conducted to estimate the impact on prices by alcohol group and uncover the demand and supply dynamics in the market. The relationship between alcohol, tobacco, and pan is examined using prohibition as an exogenous instrument, and the spill-over effects of policy on the demand for these goods are calculated. Prohibition is estimated to decrease alcohol participation by 26% with the effect varying by alcohol type and extent of prohibition. While both supply and demand shifts drive the decrease in consumption, the evidence suggests the deterrent effect of prohibition is significant. Tobacco and pan are found to be complements to alcohol and prohibition is associated with a fall in their demand. Chapter 4 focuses on the impact of prohibition on intrahousehold resource allocation by estimating Engel curves for broad categories of expenditure. The results indicate prohibition increased outlays for food and fuel with the magnitude of change being consistent with the reduction in alcohol estimated. The negative private and social effects of alcohol use are also examined. Prohibition led to a decrease in spurious liquor consumption and incidence of burglaries. However, it is associated with an increase in liver disease deaths and homicide rates.