Alcohol/Leisure Complementarity: Empirical Estimates and Implications for Tax Policy

Sarah E. West Ian W.H. Parry Abstract This paper provides a first attempt to estimate the cross-price elasticity between alcoholic beverages and leisure, which is critical for assessing how much alcohol taxation might be warranted on fiscal grounds. We estimate an Almost Ideal Demand System defined over alcohol, leisure, and other goods, using data from the Consumer Expenditure Survey and other sources. Our results suggest that alcohol is a relative…