TY - JOUR AU - Grossman,Michael AU - Chaloupka,Frank J. AU - Sirtalan,Ismail TI - An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels JF - National Bureau of Economic Research Working Paper Series VL - No. 5200 PY - 1995 Y2 - July 1995 UR - http://www.nber.org/papers/w5200 L1 - http://www.nber.org/papers/w5200.pdf N1 - Author contact info: Michael Grossman Ph.D. Program in Economics City University of New York Graduate Center 365 Fifth Avenue, 5th Floor New York, NY 10016-4309 Tel: 212/817-7959 Fax: 212/817-1597 E-Mail: mgrossman@gc.cuny.edu Frank J. Chaloupka, IV University of Illinois at Chicago Department of Economics (m/c 144) College of Liberal Arts and Sciences 601 S. Morgan Street, Room 713 Chicago, IL 60607-7121 Tel: 312/413-2287 Fax: 312/996-3344;630/801-8870 E-Mail: fjc@uic.edu AB - This paper aims to refine and enrich the empirical literature dealing with the sensitivity of alcohol consumption and excessive consumption to differences in the prices of alcoholic beverages. The main refinement pertains to the incorporation of insights provided by a model of rational addictive behavior which emphasizes the interdependency of past, current, and future consumption of an addictive good. The data employed in this study consist of a U.S. panel whose members range in age from seventeen through twenty-seven. Since the prevalence of alcohol dependence and abuse is highest in this age range, addictive models of alcohol consumption may be more relevant to this sample than to a representative sample of the population of all ages. We find that alcohol consumption by young adults is addictive in the sense that increases in past or future consumption cause current consumption to rise. The positive and significant future consumption effect is consistent with the hypothesis of rational addiction and inconsistent with the hypothesis of myopic addiction. The long-run elasticity of consumption with respect to the price of beer is approximately 60 percent larger than the short-run price elasticity and twice as large as the elasticity that ignores addiction. ER -