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close this bookAlcohol-related Problems as an Obstacle to the Development of Human Capital (WB)
View the documentAcknowledgements
View the documentForeword
View the documentAbstract
View the documentIntroduction
Open this folder and view contentsThe nature of alcohol-related problems
Open this folder and view contentsTrends in production and consumption
Open this folder and view contentsLevels and trends in alcohol-related mortality and morbidity
close this folderHow much do alcohol-related problems cost?
View the documentCosts associated with alcohol consumption
View the documentBenefits associated with alcohol consumption
Open this folder and view contentsRole of government and policy options
View the documentConclusion
View the documentBibliography
View the documentAppendix tables
View the documentDistributors of world bank publications

Benefits associated with alcohol consumption

Over the years, various articles and studies have extolled the beneficial effects of moderate alcohol consumption. The benefits of alcohol production and consumption fall into two general categories. First, the medical and psychological benefits, followed by the less well analyzed economic benefits.

Although it is particularly difficult to quantify the health benefits from consuming alcohol, a wide body of literature discusses the positive health implications of moderate alcohol consumption, typically by analyzing the impact of drinking patterns on the incidence of various diseases associated with alcohol. The Fourth Special Report to the United States Congress on Alcohol and Health considered the moderate drinker as one who consumed 0.22 to 0.99 oz. of ethanol per day and the light drinker as one who consumed 0.01 to 0.21 oz. per day. Medical evidence indicates that drinking in moderation may have positive health effects. A number of studies (Baum-Baicker, 1985) confirm a negative association between alcohol use and ischemic heart disease (IHD). Additional evidence shows that moderate intake of alcohol can also lower the risk of high cholesterol. The literature on the benefits of alcohol typically emphasizes that moderate drinking can have positive health effects, such as a lower rate of coronary heart disease (CHD).

Table 4: Estimated cost of alcohol - related problems in United States


Estimate Cost (US$)

Lost Production



77 090 000,000



Health Care


Road accidents


Fire losses


Violent crime


Social response





Source: Schifrin, 1983

The evidence of the benefits of alcohol intake relies on the observed correlation between low levels of ischemic heart mortality and moderate drinking. At a macro level, lower levels of coronary death are associated with increasing consumption of wine in the United States and with above average levels of consumption in France. Furthermore, a lower risk of hypertension has been reported for moderate drinkers (0.22 to 0.99 ounces per day) rather than for abstainers or those having more than 3 drinks per day (BaumBaicker, 1985).

The preceding section discussed a few of the medical benefits which are ascribed to the consumption of alcohol. The economic benefits are also difficult to quantify, but may be expressed in terms of consumer and producer surplus. On the consumption side, consumers of alcoholic beverages benefit from the satisfaction or utility derived from drinking. The purchasing price of alcohol is generally a price which is below the maximum price that the consumer is willing-to-pay. The difference between the price that consumers are willing-to-pay for all levels of consumption and the market price is defined as the consumer surplus. The amount spent on alcoholic beverages by consumers is then the minimum value of this benefit to the consumer.

In many developing countries the relative importance of the production and distribution of alcohol in the economy appears to be increasing. It has been argued that the production and distribution of alcoholic beverages can play a supporting role in development, as the beverage industry may be a significant part of employment and can encourage the development of ancillary industries which supply needed input for alcohol production but also foment the development of infrastructure for other industries. According to proponents of developing alcohol production, setting up a brewing industry in a developing country uses indigenous raw materials, introduces simple industrial discipline and techniques, stimulates construction, and reduces the flow of foreign exchange outside the country for the purchase of imported beverages. There is little evidence to support these claims, however. Moreover, the raw materials, energy sources, and capital needed by the industry are imported, and many of the profits will not be reinvested in the country.

One possible crude measure of the value of production and distribution of alcohol is producer surplus. Producer surplus represents the difference between the incomes and rents (profits) received for the production and distribution of alcoholic beverages at the market price minus the incremental cost of production. In addition, if the other commodity markets, i.e. the glass market, are perfect, the calculation of producer surplus includes the value of the secondary effects of ancillary industries discussed in the preceding paragraph.

Government intervention to ameliorate alcohol-related problems should be dependent on an analysis of the costs and the benefits to society versus the effectiveness with which government can reduce the burden of the alcohol-related problem. The following section will discuss the role of government with respect to alcohol-related problems and the various policy instruments available to government policymakers.


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