Is there a link between alcohol consumption and the level of poverty?

ABSTRACT

In many developing countries, in addition to household income, there are a number of other socio-economic determinants of poverty. One such hidden socio-economic factor is alcohol consumption and some studies argue that there is a link between alcohol consumption and poverty. The main aim of this study is to measure the effects of alcohol consumption on the level of poverty in a systematic way. Using Sri Lanka as a case study, this article demonstrates that the consumption of various types of alcoholic beverages, particularly, the illegal beverages, has a significant positive association with the level of poverty. The findings of this study suggest that, in Sri Lanka, the consumption of illegal alcoholic beverages increases the likelihood of being in a poor household by 2–3%. The results of this study also find that households who are characterized as nonpoor but are just above the poverty line behave more like the poor rather than the nonpoor in terms of alcohol consumption. Some of the conclusions from this Sri Lankan case study can be applied to other developing countries.

KEYWORDS:

• Alcohol consumption
• ordered probit model
• poverty
• household characteristics

JEL CLASSIFICATION:

• C21
• I32

Acknowledgements

The authors would like to thank the two anonymous referees of this journal and Professor E A Selva Selvanathan of the Economics and Business Statistics Discipline, Griffith University, for their constructive comments on an earlier version of the article, which has made substantial improvements in the article.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ This is the most common and accepted name of illicit brewing in Sri Lanka.

² HIES is conducted every 5 years by the DCS. HIES of 2006/07 was the sixth series and was conducted during the period from July 2006 to June 2007. This survey covered 18,544 households (76,749 persons) in all provinces in the country excluding Northern and Eastern Provinces, due to the unavailability of a proper sampling frame and civil war in those areas. Even though the HIES 2009/10 data are also available now, as this survey was done very close to the end of the 30-year war in Sri Lanka, the data are not reliable.

³ The Sri Lankan government had been using a poverty line based on a Food-Energy-Intake (FEI) method but now uses the CBN method to derive the OPL in Sri Lanka. The FET method of the poverty line is based on the minimum expenditure needed to consume the minimum number of calories needed for survival. The CBN poverty line includes not only the minimum food expenditure but also nonfood expenditure for subsistence.

⁴ The possible problem of endogeneity in model (1) was investigated for the Sri Lankan data and was found it not be a problem. We also performed an IV estimation using budget shares of alcohol types as an instrumental variable (satisfying the required conditions), and found that the estimation results are very similar to the estimation results presented in Table 3.

⁵ New variables for selection with p-value <0.10 and previously selected variables for removal with p-value ≥0.15. Number of elderly, headship, age of the household head and other liquor variables were not selected by the stepwise technique.