The Russian Federation is one of the countries with the highest alcohol consumption per capita in the world. The imposition of the excise duty1 is a long-standing practice in the Russian Federation (RF). According to the Federal State Statistical Service, the production and sale of the vodka amounted to
1 This type of tax is an indirect tax included in the price of certain goods that are harmful to health. At the same time, the authors show that addicted individuals. respond to changes in the price of goods. Khaltourina and Korotayev (2013) reviewed the history of the most important anti-alcohol policies and tax implementation in the Russian Federation.
They also found that the increase in excise duty in the period 2004-2012 reduced mortality compared to the years 1998-1999 when the tax was reduced. The common thought of most articles is that an increase in excise duties or minimum prices does not produce the expected results in reducing alcohol consumption. The RLMS community minimum prices were not taken due to the many missing details in the data.
According to policy implementation, an increase in the price of vodka can result in a substitution effect - people will reduce their consumption of a high-priced commodity and switch to more affordable ones such as beer, wine or moonshine.
Descriptive Statistics
And vice versa, the demand for one type of wine may decrease, which means that the drinks are complementary and are preferred to be used together. The next figure shows average daily alcohol consumption only for individuals who reported being drinkers. The consumption of moonshine, fortified wine, dry wine and vodka appears to be moderately similar.
As shown in the figure, after the policy implementation, moonshine consumption increased from 290 grams in 2010 to 310 grams in 2013. Interestingly, fortified wine consumption showed an increasing trend until 2010 and then started to decline. This first showed a clear decline in 2011 and then started to decline in a more gradual manner.
Overall, there is little change in the consumption of moonshine and fortified wine after the policy was implemented in 2010 for those who reported being drinkers. Along with the growing consumption pattern of beer, both beer and cold moonshine become a cheaper alternative to overpriced drinks and that is why it started to be consumed more. At the same time, there is no significant change in consumption behavior for both consumers and the population as a whole.
It is likely that the persons did not drastically decrease, but implemented price floor primarily resulted in an increase in the quality of alcohol or a decrease in the illegal sale of alcohol, which were the primary policy goals.
Empirical Results
General Results
Compared to females, males seem to decrease the consumption of vodka to some extent after MRP. The law stimulated increased consumption of beverages with a lower alcohol content (beer), which is due to the income effect. Being a man is positively related to consumption, while having a job and several years of education has the opposite relationship.
Thus, for example, the working person consumes lower amounts of moonshine and vodka by 13.6 and 8.3 percent, respectively. Compared to single individuals (base group), married people consume less beer, fortified wine, moonshine and vodka; widows and widowers also consume less moonshine. Higher household income resulted in lower moonshine consumption, while its lagged value decreased consumption of all beverages except moonshine.
Interestingly, the current consumption of alcoholic beverages was highly influenced by the previous year's consumption, showing an additive nature of drinking. Thus, if the individual consumed alcohol last year, his or her consumption of beer, dry wine, fortified wine, moonshine, and vodka increased by and 11.8 percent, respectively, in the current period. The cross price elasticities are positive and significant which means that a 10 percent dry wine price increase results in a 5.9 percent moonshine and 3.4 percent increase in fortified wine consumption.
At the same time, the fortified wine own-price elasticity is significant and equal to -0.83. As reviewed in the previous parts, the heterogeneity of population is an important factor for consideration while estimating the policy effect.
Gender
The result is consistent with the Russian language literature reviewed in the previous section, which states that the pricing policy does not reduce the consumption of alcoholic beverages, but only makes people switch to another type. The previous alcohol consumption also affects the current consumption of beer for women and once again shows that the consideration of addiction is important.
Nationality
After the MRP implementation, compared to the basic group, Russians were between 46 and 59 years old. The results look reasonable, as Russians might be more familiar with home production of moonshine, so it can be replaced by other drinks. The increase in current alcohol consumption was influenced by past alcohol consumption from 8 to 13 percent for Russian nationals.
Community
There is still an effect of previous alcohol use on rural residents, but the number of observations is also small under this regional sample restriction. This study finds empirical evidence that the implementation of the MRP policy on vodka and spirits changes the consumption of alcoholic beverages other than vodka. The changed price of vodka and spirits mainly resulted in a higher consumption of other alcoholic drinks.
Compared to women, men were more influenced by politics and increased their consumption of fortified wine by 4.94 percent. Previous alcohol consumption has a markedly large effect on the current consumption of beer, dry wine, fortified wine, moonshine and vodka. At the same time, the strong effect of addictive habits is another possible reason for little political effect.
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