Alcohol and Labor Supply: The Case of Iceland
Posted: 17 Jun 2007
Date Written: June 1, 2007
At a time when the government of Iceland considers privatization of alcohol sales and a reduction of its governmental fees, it is timely to estimate the potential effects of this policy change. Given that the privatization of alcohol sales coupled with the tax reduction should lead to a significant decrease in the unit prices of alcohol, one would expect the quantity consumed to increase. While it is of interest to project the impact of the proposed bill on the market for alcohol, another important consideration is the impact that increased alcohol consumption and, more specifically, probable alcohol misuse would have on other markets in Iceland. The only available study on this subject, which uses Icelandic data, yields surprising results. Tómasson et al. (2004) unexpectedly found no effect of probable alcohol abuse on sick leave. This is inconsistent with the international literature (Manning et al. 1991). A logical next step would be to examine the effect of probable alcohol abuse on other important labor-market outcomes. The data allow for an analysis of probable misuse of alcohol and labor-supply choices. The current study reports the association between alcohol problems and labor-supply choices using nationally representative survey data collected by Gallup Iceland in 2002. Labor-supply choices are considered with reference to possible effects of policies already in force, as well as proposed changes to current policies. Contrary to intuition, but in agreement with the previously mentioned Icelandic study, adverse effects of probable misuse of alcohol on employment status or hours worked are not confirmed within this sample. The reasons for the results are unclear, although some suggestions are hypothesized. Currently, data are not available to test those theories convincingly.
Keywords: Alcohol, Labor Supply, Employment, Hours Worked, Iceland
JEL Classification: I1, J30, J71
Suggested Citation: Suggested Citation