Exploring the Effects of Cross-state Differences in Liquor Retail Restrictions

Abstract

Laws regulating the retail sale of alcoholic beverages vary greatly by state. Whereas some states allow the sale of beer, wine and hard liquor at grocery stores and other retail establishments, others restrict the sale of one or more of the beverage categories to private or state-owned liquor stores. Increasingly states have considered the liberalization of alcoholic beverage sales. Although Washington is the only state to significantly liberalize their regulation of alcohol in recent years, several states across the country have also considered loosening existing restrictions. This paper examines the impact of retail restrictions on alcohol consumption as well as retail sector structure and employment using panel data from the fifty US states from 2001 to 2010. Preliminary results suggest that prohibiting wine and hard liquor sales at grocery and convenience stores reduces alcohol consumption and increases liquor store employment, but does not affect employment in grocery stores or other retail establishments. However, states that only prohibit hard liquor sales at grocery and convenience stores and states that prohibit all alcohol sales at such stores are not significantly different than unrestricted states in terms of overall alcohol consumption or liquor store employment. These results may contribute to the policy debate surrounding the liberalization of state alcohol retail laws.