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Abstract
I show that this new regulation has failed to achieve the objectives because of n reasons
reasons
This study investigates the impact of beer taxes and a variety of alcohol-control policies on
motor vehicle fatality rates. Special attention is paid to omitted variables biases resulting from
failing to adequately control for grassroots efforts to reduce drunk driving, the enactment of
other laws which simultaneously operate to reduce highway fatalities, and the economic
conditions existing at the time the legislation is passed. In the preferred models, most of the
regulations have little or no impact on traffic mortality. By contrast, higher beer taxes are
associated with reductions in crash deaths and this result is relatively robust across
When fixed costs are present, markets can deliver an excessive number of
products in inefficient product space locations under free entry. In this paper,
we study product provision under an alternative form of market organization,
state-run monopoly, using data from the Pennsylvania Liquor Control Board
(PLCB), the state’s monopolist wine and spirits retailer. We use information on
store location choices, prices, wholesale cost, and sales to uncover the goals
implicit in its entry decisions.
We estimate a model of demand for liquor as a function of the price,
distance to stores, and other demographic characteristics. In counterfactual
analyses, we calculate configurations of stores that 1) maximize welfare, 2)
maximize profit, and 3) mimic free entry. We then compare the actual PLCB
store network to these analogs of theoretical benchmarks.
We find that the PLCB’s implicit goal is better characterized by welfare
than profit maximization. The state has roughly 3 times the number of stores
that would maximize profit and about a fifth more than would maximize
welfare. We also find that atomistic location decisions would dissipate between
6.9 and 11.5% of welfare from excessive clustering and entry of stores arising
from the failure to internalize business stealing.
\label{fig:FIGURE_ID}
