University of South Florida Scholar Commons Graduate Theses and Dissertations Graduate School January 2013 The Dynamics of Alcohol Consumption in the Russian Federation: Implications of Using Price Related Policies to Control Alcohol Use Arseniy Pavlovich Yashkin University of South Florida, [email protected] Follow this and additional works at: http://scholarcommons.usf.edu/etd Part of the Economics Commons, and the Public Health Commons Scholar Commons Citation Yashkin, Arseniy Pavlovich, "The Dynamics of Alcohol Consumption in the Russian Federation: Implications of Using Price Related Policies to Control Alcohol Use" (2013). Graduate Theses and Dissertations. http://scholarcommons.usf.edu/etd/4968 This Dissertation is brought to you for free and open access by the Graduate School at Scholar Commons. It has been accepted for inclusion in Graduate Theses and Dissertations by an authorized administrator of Scholar Commons. For more information, please contact [email protected]. The Dynamics of Alcohol Consumption in the Russian Federation: Implications of Using Price Related Policies to Control Alcohol Use by Arseniy Pavlovich Yashkin A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy Department of Health Policy and Management College of Public Health University of South Florida Major Professor: Etienne Pracht, Ph.D. Gabriel Picone, Ph.D. Alan Sear, Ph.D. Barbara Orban, Ph.D. Darrell Slider, Ph.D. Date of Approval: September 20, 2013 Keywords: economics, health, control, Russia, addiction Copyright © 2013, Arseniy Pavlovich Yashkin Table of Contents List of Tables ..................................................................................................................... iii List of Figures .................................................................................................................... iv Abstract ................................................................................................................................v Chapter 1: Introduction ....................................................................................................... 1 1.1 Russia and Alcohol: A Historical Background ..................................................3 1.1.1 The Pre-Imperial Era ................................................................................. 4 1.1.2 The Imperial Era ........................................................................................ 8 1.1.3 The Communist Era ................................................................................ 13 1.1.4 The Post-Communist Era ....................................................................... 25 1.2 Russia and Alcohol – The Current Day ...........................................................28 Chapter 2 Literature Review ............................................................................................. 32 2.1 Modeling Addiction: Theoretical Aspect........................................................32 2.2 Modeling Addiction: Mathematical Aspect ....................................................48 2.3 The Demand for Alcohol .................................................................................56 Chapter 3 Research Design ............................................................................................... 63 3.1 Econometric Methodology...............................................................................63 3.2 The Data ...........................................................................................................66 3.3 Empirical Specification ....................................................................................68 Chapter 4 Results .............................................................................................................. 73 Chapter 5 Discussion and Conclusions ............................................................................. 80 5.1 Discussion of Results .......................................................................................80 5.2 Health Policy Implications ...............................................................................84 5.3 Conclusion .......................................................................................................85 Figures............................................................................................................................... 86 Tables ................................................................................................................................ 89 List of References ............................................................................................................. 98 Appendix A: Abridged Timeline of Alcohol Regulation in Russia ............................... 109 i Appendix B: Conversion Rates of Historical Russian Measures ................................... 110 ii List of Tables Table 1: Summary Statistics ..............................................................................................89 Table 2: OLS Benchmark - Myopic Specification ............................................................90 Table 3: FE 2SLS Benchmark - Myopic Specification .....................................................91 Table 4: 2 Step System GMM Benchmark - Myopic Specification ..................................92 Table 5: 2 Step System GMM - Rational Specification ....................................................93 Table 6: Beer Consumption ...............................................................................................94 Table 7: Wine Consumption ..............................................................................................95 Table 8: Vodka Consumption ............................................................................................96 Table 9: Elasticities ............................................................................................................97 iii List of Figures Figure 1: Yearly Response Rates ...................................................................................... 86 Figure 2: Consumption Trends ......................................................................................... 87 Figure 3: Price Trends ....................................................................................................... 88 iv Abstract This dissertation models the dynamics of alcohol use in the Russian Federation with an emphasis on identifying policy implications most likely to be effective at controlling alcohol use. Utilizing data from The Russian Longitudinal Monitoring Survey, models of alcohol consumption are estimated using both myopic and rational specifications via ordinary least squares, fixed effects two stage least squares and, the focus of this study, two-step system generalized method of moments. Alcohol consumption is studied both as a composite good and as a distinct beverage category (wine, beer, and hard liquor). Furthermore, equations stratified by gender and rural status are included to better identify effects specific to relevant subgroups of the sample. Strong evidence of myopic addiction in both the overall sample and the stratified subgroups are identified. Even so, alcohol does seem to follow the law of demand within the myopic specification indicating that consumers will still react to changes in price. No evidence for rational addiction is found in either the complete sample or its subgroups. Results from the sample subgroups (male/female, urban/rural) were consistent with the overall pattern observed in the full sample, but differed in magnitude. This would suggest that, although alcohol consumption in individuals is affected by similar factors, regardless of gender or geography, the extent to which these individuals are affected differs. This reality would lend credence to "targeted" public health interventions for specific subgroups of individuals, rather than a one size fits all approach. v Chapter 1: Introduction From a public health perspective, it is clear that alcohol consumption plays a major role in morbidity and mortality and imposes extensive private and social costs in a number of countries around the world (Edwards, 1994), (Holder & Edwards, 1995). Policies aimed at increasing the price of alcohol consumption, whether directly through taxes or indirectly through access restrictions are the main tools used around the world to combat these ills. Alcohol control policies, however, yield different results depending on the economic, social, cultural and, political realities of a particular country. This dissertation intends to model the dynamic of alcohol use in the Russian Federation with the intent to identify the viability of using price related policies to affect the level of alcohol consumption in the population as well as any negative side effects that could arise as a result. To further this goal three main tasks will be accomplished. The first task provides background knowledge on the history of the alcohol problem in Russia and reviews the attempts to solve it by various regimes. Special attention will be paid to the relationship between the legal and underground sectors of the alcohol market and any adverse side effects that resulted from a particular policy. This is done to put any policy implications made as a result of this study into cultural perspective since policies that work well in one country can fail spectacularly in another if care is not taken to adapt them to local realities. 1 The second task will concentrate