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REPEAL OF PROHIBITION: A BENEFIT‐COST ANALYSIS
Author(s) -
Vitaliano Donald F.
Publication year - 2015
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12065
Subject(s) - repeal , revenue , tax revenue , economics , economic surplus , agricultural economics , cost–benefit analysis , price elasticity of demand , business , public economics , law , microeconomics , finance , welfare , market economy , political science
In spite of an estimated increase in annual alcohol‐related motor vehicle costs of $2.767 billion (1947 dollars), the net social benefit of repeal of alcohol Prohibition amounts to $432 million per annum in 1934–1937, about 0.33% of gross domestic product. Total benefits of $3.25 billion consist primarily of increased consumer and producer surplus, tax revenues, and reduced criminal violence costs. A Monte Carlo simulation shows the probability of negative net benefits is 16%. The estimated price elasticity of demand for spirits, beer, and wine are –.60, −.56, and –.51 respectively, which is consistent with the modern literature . ( JEL D61, I18, K420, I120)