Albany, NY – In today's Academic Minute, Dr. Michael French of the University of Miami explains the link between the health of the economy and patterns of alcohol consumption.
Michael French is a professor of health economics in the Department of Sociology at the University of Miami where his research interests include health policy and program evaluation, substance abuse research, health economics, alternative health care delivery systems, human resource economics, and the economics of crime. He also serves as director of the Health Economics Research Group and research director of the Health Administration and Policy Program in the School of Business Administration. Dr. French holds a Ph.D. in economics from Boston College and has published approximately 150 peer-reviewed articles in a variety of multidisciplinary professional journals.
Dr. Michael French - Economic Downturn and Alcohol Consumption
Are recessions really good for your health? Does risky alcohol consumption decline when the economy falters? Surprisingly, several economic studies in the past twenty years have answered yes to both questions, which motivated us to reexamine these issues with more recent data, better measures, and different estimation methods.
Contrary to most of the published literature, we find that an increase in the unemployment rate is associated with three specific types of problematic drinking: binging, driving while impaired, and alcohol abuse or dependence. Although the effects are slightly larger for young adults and African Americans, the results endure for different racial, ethnic, and age groups, as well as both genders.
To help understand these findings, it is useful to consider three distinct mechanisms. The first, sometimes referred to as the income effect, implies that individuals will reduce their consumption of alcohol when income goes down, as is typical during a recession. The self-medicating hypothesis suggests that people will drink more to cope with tough economic times. Finally, when the unemployment rate goes up and more people lose their jobs, they will have more leisure time, and alcohol consumption is a desirable leisure time activity. Thus, it appears as though the income-effect is dominated by a combination of the leisure-time and self-medicating mechanisms.
The policy implications of our research are both timely and alarming. If alcohol abuse and dependence rise during a period of economic decline, then these conditions are an indirect and unfortunate outcome of business cycles. Perhaps alcohol abuse treatment programs and other related service providers should prepare for increased demand during economic downturns.