The Economics of Alcohol in Australian Rural Communities

Source: OAI


Alcohol is a complex good which is ingrained within the social fabric of Australian culture. This is even more apparent within rural communities which are considered to have higher levels of risky alcohol consumption. While alcohol provides pleasure to many, it has devastating effects for others. Not only are individuals themselves affected, but also their families and the community at large. This thesis considers a number of the economic aspects associated with alcohol consumption in rural Australia. This thesis was completed in conjunction with a larger ongoing project: Alcohol Action in Rural Communities (AARC), which is a cost-benefit analysis of community-wide interventions to reduce alcohol-related harm in rural Australia. Given the study involves 20 rural communities in New South Wales, Australia; much of the analysis is centred around data collected from these communities. This thesis examines the amount and patterns of alcohol consumption, some of the associated harms, the value of reducing these harms, plus professionals’ and the public’s opinions on interventions, viewed as an optimal solution to reduce alcohol-related harm for the communities within this study. First, those factors which affect individuals’ decisions regarding how much alcohol to consume are examined through econometric modelling of the demand for alcohol. Moreover, a theoretical model is derived whereby individuals choose both the intensity and frequency of alcohol consumption in order to maximise their utility. This is then used to examine those factors that affect the relationship between intensity and frequency of alcohol consumption for individuals within the 20 communities of the study. Secondly, the impact that this alcohol consumption has in terms of the effect on morbidity, crime and traffic accidents within these 20 communities is analysed. The relationship between selfreported quality of life using the EQ5D (a quality of life instrument) and self-reported risky alcohol use are examined using ordered Probit and Tobit models. Also, the relationship between community levels of risky drinking and crime and traffic accidents that occur in alcohol-related times is analysed, controlling for the underlying level of crime in the community by using the rate of incidents that occur in non-alcohol-related times. It is found that rural communities in Australia are experiencing a sizeable amount of potentially avoidable harm due to risky alcohol use. Thirdly, the value of reducing alcohol-related harm in these communities, in terms of the amount households are willing to pay for these reductions, is estimated using contingent valuation methods. Individuals’ willingness to pay for a percentage reduction in alcohol-related harm is estimated using both a postal questionnaire for the 20 communities, plus a face-to-face questionnaire conducted in two of these communities. The face-to-face questionnaire is also used to conduct a double-bounded dichotomous choice experiment, to investigate the willingness of households to pay for a reduction in a number of different types of alcohol-related harm. Finally, the views on the optimal policy options to reduce alcohol-related harm for rural communities in Australia are examined for both professionals and the general public. A sample of drug and alcohol (D&A) professionals were asked to allocate a budget of $100,000 to a number of interventions in order to reduce alcohol-related harm in a hypothetical rural community. The D&A professionals most commonly selected interventions include training general practitioners (GPs), targeting high-risk groups, developing a harm-reduction code of practice, expanding social work services and the training of emergency department staff. Additionally, individuals from the general public were asked via a postal questionnaire to allocate a percentage of total funds to eight intervention areas in order to reduce alcohol-related harm in their communities. The top three intervention areas given the most funding, on average, by the public were school-based interventions, educational messages in the media, and greater police enforcement. There is no doubt that alcohol consumption causes a substantial amount of harm for rural communities within Australia. This thesis has provided information to inform the development of interventions tailored to specific communities and has derived estimates which can be used to help evaluate the cost-benefit of these interventions. There is still additional research to be done in order to obtain more accurate estimates of the exact effect alcohol has on rural communities and thus comprehensively evaluate which interventions are likely to be the most cost-effective in reducing this harm.

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