Long-Run Effects of Public Policies: Endogenous Alcohol Preferences and Life Expectancy in Russia

Can a temporary policy permanently change consumer tastes, and does it matter? We study how a public policy successfully changes young individuals’ tastes, with important but unintended long-run consequences for mortality. We estimate the age profile of taste formation using a brief prohibition period from 1985–87, which dramatically changed the relative supply of alcoholic drinks. Twenty years later, young consumers’ tastes have shifted from hard to light alcoholic drinks. These policy-induced taste changes matter: Shifts in alcohol tastes explain about 60% of the recent decline in Russian male mortality decades after the initial shock to the alcohol market. These results extend to non-alcoholic goods. Using large import shocks to non-alcoholic goods in the late 1990s, we show that young consumers’ long-run tastes have also shifted from traditional to ‘western’ products. Program evaluations which focus only on the short-run impact of a policy can therefore yield severely biased estimates of the total effect if the policy also changes tastes. JEL Classification: D12, H31, I18, J18.