What drives unrecorded production and consumption?

Pricing and Availability Policies

Governments often use taxation, pricing, and availability policies targeting the recorded, or formal, market as tools for raising revenue, curbing overall alcohol consumption, or both. Because unrecorded alcohol falls outside the regulated market directly affected by these policies, it is likely that such policies have a differential impact on recorded and unrecorded alcohol products.

Taxation and pricing may vary by type of beverage, ethanol content, and price per unit. The law of demand inversely links a product’s price to its demand, ceteris paribus. Accordingly, increasing the price of alcohol (i.e., through tax increases) is often expected to lower alcohol consumption and potentially reduce its adverse consequences. However, an important question regarding the impact of pricing policies is the extent to which an increase in the price of recorded products simply encourages substitution within the larger alcohol market, shifting some formerly recorded consumption to the unrecorded market.

Policies that influence the availability of licit and/or illicit products ― such as laws surrounding the production, purchase, and sale of ethanol, as well as dry laws and import restrictions ― may also effect a growth or decline of the unrecorded market.

Population-Based Surveys

Surveys can be useful tools for examining the impact of pricing and/or availability policies on the unrecorded market. A main advantage of survey data is that it allows for examination of outcomes by sub-groups of interest, a level of data often not provided by national statistical agencies. Examples of groupings include drinker type (e.g., abstainers, light, moderate, heavy, binge), socio-economic status, age, and gender. Because surveys can collect information from a large of number of people, they may be particularly useful in countries where there is limited data on the alcohol market. And, as previously discussed (see What is the Size and Composition of the Unrecorded Market), surveys are particularly useful for collecting consumption information on beverage categories not typically covered by official statistics, such as homemade and surrogate beverages.Survey approaches to examining the impact of policy changes can be broken down into two main types:

• single-wave surveys that ask respondents how they either did or would react to a specific policy change; and
• multiple-wave surveys that collect data both before and after a policy change in order to observe changes in (reported) behavior over time.

With a single-wave survey, respondents may be asked about their reactions to various hypothetical policy changes, such as:

• the introduction or raising of the minimum legal age to purchase alcohol;
• active enforcement of the minimum legal age for alcohol purchase;
• the management of the sale of alcohol to intoxicated individuals in the on-trade; and
• changes in licensing hours or days on which alcohol is on sale.

Respondents might also be asked how they would react to price changes affecting the beverages they drink, such as changing the quantity of alcohol consumed or brand or product switching. This can yield often hard-to-find information on how price changes in the recorded market may affect the unrecorded market (see Illustrative Example E). 

 Finally, single-wave surveys can also ask respondents to reflect on a recent policy change.  For example, one study surveyed residents of Scotland regarding their views on whether the changes in licensing laws encouraged increased consumption, and the numbers of drunken people they could recall seeing before and after the licensing changes (Duffy and Plant, 1986).Even when respondents are motivated to respond truthfully ― which cannot be assumed when sensitive subject matter is involved ― the ability of respondents to accurately recall how they changed their behavior or predict how they would react (as in Illustrative Example E above), is often questioned. This can pose a problem for the interpretation of data collected through single-wave surveys.Using a multiple-wave design in which data are collected both before and after the implementation of a policy and changes in relevant behaviors (e.g., overall and beverage-specific consumption) between the waves are identified, eliminates such concerns associated with errors in prediction. These before‒after survey designs can be cost prohibitive, however, because of the multiple waves of data collection required. Another limitation of before‒after designs is that if other policy changes or major events occurred around the same time as the policy change of interest, it may be difficult to discern what changes ― if any ― in unrecorded consumption can be attributed to the policy change itself rather than to one or more confounding variables. Limitations of both one-wave and multiple-wave surveys include the potential for inaccuracies introduced either through honest recall errors or intentionally misleading responses, and / or because of undercoverage of special populations. 

 

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