NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Beer Taxes, the Legal Drinking Age, and Youth Motor Vehicle Fatalities

Henry Saffer, Michael Grossman

NBER Working Paper No. 1914 (Also Reprint No. r0913)
Issued in September 1987
NBER Program(s):   PE

Based on a time series of state cross sections for the period from 1975 through 1981, we find that motor vehicle accident mortality rates of youths ages 15 through 17, 18 through 20, and 21 through 24 are negatively related to the real beer excise tax. We also find that the death rate of 18 through 20 year olds is inversely related to the minimum legal age for the purchase of beer. Simulations suggest that the lives of 1,022 youths between the ages of 18 and 20 would have been saved in a typical year during the sample period if the Federal excise tax rate on beer, which has been fixed in nominal terms since 1951, had been indexed to the rate of inflation since 1951. This represents a 15 percent decline in the number of lives lost in fatal crashes. The simulations also suggest that the lives of 555 youths per year would have been saved if the drinking age had been 21 in all states of the U.S. These figures indicate that, if reductions in youth motor vehicle accident deaths are desired, both a uniform drinking age of 21 and an increase in the Federal excise tax rate on beerare effective policies to accomplish this goal. They also indicate that the tax policy may be more potent than the drinking age policy.

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Published: Saffer, Henry and Michael Grossman."Beer Taxes, the Legal Drinking Age, and Youth Motor Vehicle Fatalities," Journal of Legal Studies, Vol. 16, No. 2, June 1987.

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