ImpacTeen Research Papers
Habit and Heterogeneity in College Students’ Demand for Alcohol
This research investigates whether the positive association between college students’ current and high-school drinking is due to habit formation or the influence of unobserved components of individual taste. Determining the mechanism underlying the persistence in alcohol use has significant policy implications. If habit formation exists, then policies that reduce alcohol use in one period should also reduce alcohol use in future periods. If however, persistence reflects unmeasured personal characteristics, then policies targeting youth will have no impact on their long term drinking behavior. The empirical investigation is based on individual level data from the 1997 and 199 waves of the Harvard School of Public Health College Alcohol Study (CAS). CAS provides information on students’ current drinking behavior as well as retrospective information on drinking during the final year of high-school. An instrumental variables framework is used to address heterogeneity issue in examining the relationship between past and current drinking. The results show that after controlling for individual specific unobserved characteristics, high-school drinking has a significant and positive impact on college drinking, indicating the existence of habit formation. However, the effect of habituation is found to be moderated by unobserved heterogeneity.
Research Paper (PDF – 195KB)