There is No Evidence that Minimum Prices in British Columbia Had an Impact on Total Alcohol Consumption

6 Pages Posted: 9 Jun 2013 Last revised: 31 Jul 2013

See all articles by Nadeschda Hotmann

Nadeschda Hotmann

Bielefeld University

Christoph Kuzmics

University of Graz - Department of Economics

Gregor Zwirn

Bielefeld University

Date Written: July 31, 2013

Abstract

Stockwell, Auld, Zhao, and Martin (2012) claim that minimum alcohol prices had a signi cant impact on total alcohol consumption in British Columbia, Canada. To show this they perform a regression with the log of total alcohol consumption as the dependent variable and the log of the average of minimum alcohol prices as one of the independent variables using quarterly data from 1989 to 2010. We show that these two variables are integrated processes. A KPSS-test (Kwiatkowski, Phillips, Schmidt, and Shin (1992)) leads to the rejection of the null of stationarity at the 5% level of signi cance for both time-series. It is well known that regressing one integrated time-series against another integrated time-series can produce spurious correlation (see e.g. Wooldridge (2009, Chapter 11.3)). We then perform the same regression as in Stockwell, Auld, Zhao, and Martin (2012) but in annual di erences (i.e. in yearly changes). In this regression (changes in) minimum prices have no signi cant e ect on (changes in) total alcohol consumption for the given data (p-value 0.2166). Therefore, there is no evidence that the way minimum prices were set had an impact on total alcohol consumption in British Columbia.

Keywords: total alcohol consumption, minimum prices, British Columbia

JEL Classification: I18, C20

Suggested Citation

Hotmann, Nadeschda and Kuzmics, Christoph and Zwirn, Gregor, There is No Evidence that Minimum Prices in British Columbia Had an Impact on Total Alcohol Consumption (July 31, 2013). Available at SSRN: https://ssrn.com/abstract=2275924 or http://dx.doi.org/10.2139/ssrn.2275924

Nadeschda Hotmann

Bielefeld University ( email )

Universitätsstraße 25
Bielefeld, 33615
Germany

Christoph Kuzmics (Contact Author)

University of Graz - Department of Economics ( email )

Universitaetsstrasse 15
RESOWI - F4
Graz, 8010
Austria

Gregor Zwirn

Bielefeld University ( email )

Universitätsstraße 25
Bielefeld, 33615
Germany

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