How persistent are consumption habits? Micro-evidence from Russian men
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Analyzing individual-level data on the alcohol consumption of Russian males we find evidence for a longstanding persistence of habits towards certain type of habit-forming goods. Males who grew up in the USSR are accustomed to vodka – the most popular liquor during the Soviet era – whereas those who entered their twenties in the post-Soviet period when the beer industry expanded prefer beer. This finding emphasizes the importance of policies targeted at young people as they form their habits. The second main finding is that habits and substitution effects outweigh "stepping stone" effects, both in the short and long run. Policy simulation shows that a 50% subsidy on beer and 30% tax on vodka will decrease male mortality from 1.41% to 0.95% in 10 years, cutting in half the gap between Russian and western-European mortality rates.
JOUR
Kueng, Lorenz
Yakovlev, Evgeny
2013
Econometrics Laboratory Working Paper
2195
