WORKING 

 PAPERS

State Regulation of Alcohol Distribution: 

The Effects of Post & Hold Laws on Consumption and Social Harms

James C. Cooper

Joshua D. Wright

WORKING PAPER NO. 304

Original Release: August 2010

Revised: September 2010

___________________________________________________________________________

FTC Bureau of Economics working papers are preliminary materials circulated to stimulate discussion

and critical comment. The analyses and conclusions set forth are those of the authors and do not

necessarily reflect the views of other members of the Bureau of Economics, other Commission staff, or

the Commission itself. Upon request, single copies of the paper will be provided. References in

publications to FTC Bureau of Economics working papers by FTC economists (other than

acknowledgment by a writer that he has access to such unpublished materials) should be cleared with the

author to protect the tentative character of these papers.

______________________________________________________________________________

BUREAU OF ECONOMICS

FEDERAL TRADE COMMISSION

WASHINGTON, DC 20580
State Regulation of Alcohol Distribution: 

The Effects of Post & Hold Laws on Consumption and Social Harms 

James C. Cooper♦

Federal Trade Commission 

Joshua D. Wright 

George Mason University 

September 9, 2010 

Abstract 

The Twenty-first Amendment repealed prohibition, but granted the states broad power 

to regulate the distribution and sale of alcohol to consumers within their borders. 

Pursuant to this authority, states have established a complex web of regulations that 

limit the ability of beer, wine, and liquor producers to control the distribution of their 

product. From a consumer welfare perspective, one of the most potentially harmful 

state alcohol distribution regulations are “post and hold” laws (“PH laws”). PH laws 

require that alcohol distributors share future prices with rivals by “posting” them in 

advance, and then “hold” these prices for a specified period of time. Economic theory 

would suggest that PH laws reduce unilateral incentives for distributors to reduce prices 

and may facilitate tacit or explicit collusion, both to the detriment of consumers. 

Consistent with economic theory, we show that the PH laws reduce consumption by 2-8 

percent. We also test whether, by reducing consumption, PH laws provide offsetting 

societal benefits in the form of reducing drunk driving accidents and underage drinking. 

We find no measurable relationship between PH laws and these social harms. These 

results suggest a socially beneficial role for antitrust challenges to PH laws and similar 

anticompetitive state regulation. If states wish to reduce the social ills associated with 

drinking, our results also suggest that directly targeting social harms with zero tolerance 

laws and lower drunk driving thresholds are superior policy instruments to PH laws. 

JEL Codes: K21, L41, D43, L66 

Keywords: alcohol, regulation, post and hold, 21st amendment, prohibition, 

temperance, preemption, wine, beer, liquor, antitrust, collusion, price-fixing, Sherman 

Act, three-tier system, franchise, state action, federalism, drunk driving, alcoholism 

 

♦

 Cooper: Attorney Advisor for Commissioner William E. Kovacic, Federal Trade Commission. Wright: 

Associate Professor, George Mason University School of Law and Department of Economics. This 

paper is based on public information and does not purport to represent the views of the Federal Trade 

Commission or any individual Commissioner. We thank Chris Adams, Dan Hosken and two anonymous 

reviewers, each of the Federal Trade Commission Bureau of Economics, for valuable comments on an 

earlier draft. We are grateful for helpful comments from Jerry Ellig, Bruce Kobayashi and Jonathan 

Klick. We also thank Luke Olson for superb research assistance and helpful substantive input, Michelle 

Mullins and Brian Hollar for providing data and research, and Aaron Holloway for valuable legal 

research. 
1 

1. Introduction 

 The Twenty-first Amendment repealed prohibition, but granted the states power 

to regulate the sale of alcohol to consumers. Pursuant to this authority, states have set 

up a collection of regulations that limit the ability of beer, wine, and liquor producers to 

control the distribution of their product. Almost every state has mandated a “three-tier” 

distribution system, which requires an alcohol producer (or licensed importer) to sell 

their products to a wholesale distributor, and those wholesale distributors, in turn, to 

sell to the products to retailers, who in turn, sell the products to final consumers. There 

are a variety of state regulations of alcohol distribution that interact within the three-tier 

system. 

Many states also have enacted franchise protection laws, which make it 

extraordinarily difficult for suppliers to terminate their contractual relationships with 

wholesalers.1

 These laws typically prohibit the termination of wholesaler except for 

“just cause,” and set up elaborate administrative processes for proving “just cause.”2

 

Franchise protection laws may require that a demonstration of “good cause” include 

revocation of a wholesaler’s license; bankruptcy or receivership of the wholesaler; 

assignment for the benefit of creditors of the wholesaler’s assets; or failure of the 

wholesaler “to substantially comply” with a “reasonable and material requirement 

imposed upon him in writing.”3

 

Further, several states have enacted laws that require alcohol producers to grant 

exclusive geographic territories to their distributors, which exacerbate the problems that 

“just cause” laws create by preventing a producer from simply hiring another 

distributor in the same territory to distribute its brand in competition with the nonperforming incumbent distributor. Still others prohibit exclusive dealing arrangements 

between a producer and a distributor. There is a vast economics literature which 

 

1

 See, e.g., NMSA 1978 § 60-8A-8 (“The purpose of [the franchise termination laws] is to provide an 

equal bargaining position between the parties and to protect the health, safety and welfare of the citizens 

by ensuring that there is an orderly and fair distribution of alcoholic beverages in the state.”). 

2

 See, e.g., VA Code § 4.1-406 (“Notwithstanding the terms, provisions or conditions of any agreement, 

no winery shall unilaterally amend, cancel, terminate or refuse to renew any agreement, or unilateral 

cause a wholesaler to resign from an agreement, unless the winery has first [required notice to terminate] 

and good cause exists for the amendment . . ..”). 

3

Id. 
2 

explores the competitive effects of these state restrictions of alcohol distribution and of 

contractual relationships between alcohol producers and distributors. This literature 

provides evidence that generally supports the conclusion that these state regulations are 

associated with harm to consumers in the form of higher prices and reduced output.4

 

One of the most potentially harmful state alcohol distribution regulations are 

“post and hold” laws (“PH laws”). Although there is some variation in the substance of 

PH laws, they generally require that alcohol distributors “post” their proposed prices in 

advance, thus sharing future prices with rival distributors before they go into effect, and 

then “hold” these prices for a specified period of time. From a competition policy 

perspective, PH laws have the potential to harm consumers in two ways. First, PH laws 

may facilitate tacit or explicit collusion among distributions. Second, PH laws may 

also diminish unilateral incentives to engage in price-cutting. In both cases, consumers 

pay higher prices. This danger has led several federal courts of appeals to strike down 

PH laws as unconstitutionally in conflict with federal antitrust laws. In response to 

these and other legal challenges to state alcohol regulations, Congress is currently 

considering legislation that would hinder plaintiffs’ ability to challenge PH laws, 

including introducing a requirement that any such plaintiff must prove by clear and 

convincing evidence “that the law has no effect on the promotion of temperance, the 

establishment or maintenance of orderly alcoholic beverage markets, the collection of 

beverage taxes, the structure of the state alcoholic beverage distribution system, or the 

restriction of access to alcoholic beverages by those under the legal drinking age.”5

 

The key policy questions concerning PH laws, and state regulation of alcohol 

more broadly, turn on an empirical examination of both their competitive and social 

effects. In this paper, we investigate both the effect of PH laws on alcohol consumption 

as well as whether PH laws reduce some of the well-known social costs associated with 

consumption. Using a panel of 50 states from 1983-2004, we find that PH laws are 

associated with lower levels of consumer consumption of beer, wine, and spirits. 

Specifically, consumers in states with PH laws consume between 2-8 percent less 

 

4

See, e.g., Sass (2005); Sass & Saurman (1993, 1996); Slade (1988). 

5

 Comprehensive Alcohol Regulatory Effectiveness (CARE) Act, H.R. 5034, 111th Cong. (2010), 

available at http://frwebgate.access.gpo.gov/cgibin/getdoc.cgi?dbname=111_cong_bills&docid=f:h5034ih.txt.pdf. 
3 

alcohol (measured in ethanol equivalent gallons), with the effects for wine and spirits 

relatively larger than those for beer. These results generally are robust to the inclusion 

of state and time effects, national and state-specific linear trends, and techniques to 

control for the possible endogeneity of PH laws. The results are consistent with the 

prior literature linking state regulation of the alcoholic beverage industry to consumer 

harm in the form of lower output and higher prices. These results are further consistent 

with the underlying economics of PH laws, which increase incentives to collude and 

decrease unilateral incentives to discount. While we find that PH laws have a 

predictably negative impact on alcohol consumption, we also find that PH laws have no 

measurable effect on drunk driving accidents and various measures of teen drinking. On 

the other hand, laws that directly target drunk driving and underage drinking appear to 

reduce these behaviors. Together, our results cast serious doubt on the wisdom of any 

legislative attempts to increase the difficulty of mounting antitrust challenges to PH 

laws, since successful antitrust suits are likely to improve consumer welfare. 

The remainder of the paper is organized as follows. Section 2 provides a brief 

overview of the law and economics of PH laws. Section 3 presents the results of our

analysis of the impact of PH laws on output and Section 4 presents the results of our 

analysis concerning PH laws and social harms. Section 5 discusses the policy

implications of our results and Section 6 concludes. 

2. The Law & Economics of Post-and-Hold Laws 

 PH laws impose two general requirements on wholesalers: they must “post” 

their prices for the coming period with a state authority responsible for regulating 

alcohol sales, and they most “hold” these prices for the duration of the period. For 

example, New York’s PH law requires beer, wine, and spirits wholesalers to file by the 

fifth day of each month the prices that they intend to charge the following month.6

 

New York wholesalers must hold these prices for the following month.7

 Hold periods 

vary, with some states mandating longer hold periods for price reductions than for price 

 

6

See NY Alc. Bev. Con. § 101-b; NY Alc. Bev. Con. § 55-b. 

7

Id. 
4 

increases.8

 Some PH laws also make planned future prices available to competing

wholesalers and allow wholesalers to adjust their posted prices downward. Again, New 

York law makes posted prices available to competitors ten days after they are filed and 

allows wholesalers three business days to adjust their prices to meet lower competing 

prices.9

 For example, a New York wholesaler would files its prices for July on June 5. 

On June 15, the state would make these prices available to all wholesalers, who would 

have until June 18 to change their postings to meet lower prices. The prices posted on 

June 18 would then be in effect for July. 

As shown in Table 1, nineteen states have adopted PH laws since 1983. 

Currently ten states have PH laws applying to wine wholesalers,10 nine states have PH 

laws applying to beer wholesalers,11 and nine states have PH laws applying to spirit 

wholesalers.12 Since 1983, seven states have repealed their PH laws, primarily as a 

result of court decisions.13

 

2.1 Coordinated and Unilateral Effects 

Economics has long stressed the role of communication in facilitating collusion; 

absent credible information on each others’ actions, it becomes difficult for rival firms 

to coordinate.14 PH laws make coordinated pricing among wholesalers more likely by 

making it easier for competing firms to reach and enforce agreements on prices. 

As a threshold matter, firms must be able to agree on a price for collusion to 

work. When the proverbial “smoke-filled-room” is unavailable to facilitate agreement, 

firms must find other means to coordinate their actions. Heterogeneous firms are likely 

 

8

 For example, Idaho has a 30-day hold period for price increases, but a 180-day hold period for price 

decreases. See IC §§, 23-1029; 23-1329. 

9

Id. Connecticut, Missouri, and Oklahoma PH laws have similar provisions, as did the Maryland and 

Massachusetts PH laws before they were repealed. 

10 CT, ID, ME, MI, MO, NJ, NY, OK, SD, and WA. 

11 CT, GA, ID, ME, MI, NJ, OK, TN, and WA. 

12 CT, GA, MI, MO, NJ, NY, OK, SD, and WV. 

13 DE (1999), MD (2004), MA (1998), NB (1984), OR (1990), PA (1999) and WA (2008). 

14 Kühn (2001) (“The notion that communication is central to collusion is without doubt part of the 

general folklore of competition policy at least going back to Adam Smith.”); Stigler (1964); Albaek et al. 

(1997) (“At least since Stigler’s seminal article, [industrial organization] literature has stressed the 

importance for (tacitly) colluding oligopolists of observing firm-specific transactions prices of their rivals 

and rapidly detecting changes in these. Otherwise, collusion is prone to break down.”). 
5 

to have different ideal collusive price points. Thus, even if firms all want to collude, if 

they cannot communicate which prices they prefer, collusion may nonetheless be 

impossible. Announcement of future prices can help solve the coordination problem by 

providing a focal point for cartel members, thus reducing strategic uncertainty and 

making collusion more likely.15 That PH laws require wholesalers to charge the prices 

they announce, moreover, converts what may otherwise be “cheap talk” into a credible 

commitment, further increasing the probability that firms will be able to coordinate 

their pricing decisions.16 PH laws also provide wholesalers with an accurate record of 

past prices, which can help facilitate future coordination.17

 

Second, as a general matter, collusive schemes can be maintained as long as the 

present value from adhering to the price-fixing agreement is greater than the benefits 

from cheating. 18 The likelihood that this condition will hold, in turn, depends 

positively on the extent to which cartel members can detect deviations and punish them 

with intense competition.19 By requiring wholesalers to share their prices with 

competitors prior to them going into effect, post-and-hold regulations can make 

detection easier. Further, wholesalers are legally required to refrain from offering 

discounts off their posted prices during the hold period, which decreases the likelihood 

of cheating. Post-and-hold regimes that allow competitors to adjust prices after seeing 

competitors pricing, but before they go into effect, moreover, reduce the expected gains 

from cheating because the cartel members can punish competition before the cheater 

enjoys any market share gains. 

 

15 See Vives (2002); Kühn (2001); Mǿllgaard & Overgaard (2001). 

16 Announcement of future prices or other strategic decisions that are non-binding, or so-called “cheap 

talk,” is less likely to enable collusion than a binding announcement. In some circumstances, however, 

cheap talk can enhance the probability of successful collusion relative to no communication at all. See

Farrell (1987); see also Doyle & Snyder (1999) (finding evidence that automakers respond strategically 

to production announcements by rivals); Gillespie (1995) (describing how non-committal pre 

announcement of airline fares facilitated collusion among airline members). 

17 See Green & Porter (1984). 

18 Tirole (1988, at 245-57). 

19 For example, in a dynamic Cournot oligopoly model firms may agree to charge something between the 

Cournot price and the monopoly price during collusive periods and then to charge the Cournot price to 

punish deviations. Green & Porter (1984). 
6 

Consistent with the notion that sharing pricing information among competitors

may soften competition, several studies have found positive correlations between 

policies that publicized previously private contracts and higher prices. For example, 

Albaek et al. (1997) study the Danish ready-mix concrete industry and find that after 

the government forced publication of negotiated prices, average prices rose by as much 

as 25 percent, and firms began to discontinue large discounts off list price.20 Other 

studies have found that forced disclosure of negotiated prices is associated with higher 

prices in railroad markets.21 In addition, some experimental evidence suggests that 

communication (even cheap talk) among players in non-cooperative games can shift 

prices from competitive levels toward monopoly levels.22

 

Further, antitrust cases in the US have focused on information sharing as a 

means to facilitate collusion.23 For example, the Department of Justice sued eight 

major airlines and the Airline Tariff Publishing Company (ATP), alleging that the 

airlines used the ATP to exchange information about future prices via the ATP to 

facilitate a price-fixing agreement.

24 Several courts, moreover, have found that PH 

laws mimic agreements between rival wholesalers to hold prices, which constitute per 

se illegal conduct under the Sherman Act.25 In one case, for example, a wholesaler 

testified that he and rival wholesalers used the public posting to reach an agreement on 

a new price for beer. According to the court: 

Maletis testified that in 1986 . . . his wholesale business and one of the 

largest beer and wine wholesalers in the State of Oregon, used the price 

posting exchange at the OLCC as a starting point for communicating with 

 

20 See Albaek et al., supra note 14, at 440. 

21 See Fuller et al. (1990); Schmitz & Fuller (1995). Other studies have found evidence to suggest that 

rivals in the automobile and paper industries respond strategically to each other’s announced plans of

future production and capacity expansion. See Doyle & Snyder, supra note 16; Christensen & Caves 

(1997). 

22 See Kühn, supra note 14, at 82-83 for a summary of this evidence. 

23 The EC and its member states also have focused enforcement attention on various information sharing 

regimes. See Mǿllgaard & Overgaard, supra note 15, at 112-21 (discussing information sharing cases in 

Europe involving wood pulp, tractors, and gasoline). 

24 Specifically the airlines allegedly would use the ATP to suggest future collusive prices for routes that 

could be withdrawn if no agreement was reached. Further, the airlines allegedly used the ATP to 

threaten punishments for deviations. See Gillespie (1995); Viscusi et al. (2005). 

25 See pages 7-11, infra, and accompany text. 
7 

competing wholesalers of keg beer until agreement was reach by all 

wholesalers of keg beer on a new wholesale price for keg beer. 26

PH laws also provide firms with unilateral incentives to soften wholesale price 

competition by making price cuts more expensive. In settings where parties negotiate 

individual contracts and differential pricing is allowed, sellers will offer secret 

discounts to attract marginal buyers. Policies that force sellers to offer the same price 

to all buyers reduce incentives to discount because the discount must be offered to both 

marginal and inframarginal buyers. For example, “most-favored customer” (MFC) 

regulations, which require sellers to offer their lowest negotiated price to all buyers, 

have been shown to lead to higher overall price levels in some market settings.

27

 

Further, wholesalers also may have less incentive to offer discounts when their 

competitors can match them instantaneously. The gain from offering a discount to a 

retailer is increased sales of that brand. When discounts are made public, and are 

announced to all rivals before going into effect, competing wholesalers can offer the 

same discount, diluting market share gains from price cuts. Finally, holding

requirements make price reductions more expensive by forcing wholesalers to commit 

to them for extended periods of time. The holding requirement also constrains 

wholesalers' ability to experiment with price reductions; this effect is likely to be 

especially pronounced in PH regimes that have longer holding requirements for price 

reductions than for price increases. Further, longer sale periods expose wholesalers to 

risks in supply or demand changes, thus further increasing their costs. 

2.2 Antitrust Treatment of PH Laws 

 

26 See Miller v. Hedlund, 717 F. Supp. 711, 714 (D. Ore. 1989). 

27 See e.g., Scott-Morton (1997) (finding evidence that MFC rules that required pharmaceutical 

companies to offer their lowest price to Medicaid purchasers led to higher average drug prices in some

categories). Private adoption of MFC clauses between providers and insurers has raised competitive 

issues in some circumstances. See e.g., U.S. v. Delta Dental of Rhode Island, 943 F.Supp. 172 (D. RI. 

1996) (denying defendant’s motion to dismiss antitrust complaint alleging dental insurer’s MFC clauses

with participating dentist violated Sherman § 1); but see Blue Cross & Blue Shield United of Wisconsin v. 

Marshfield Clinic, 65 F.3d 1406 (7th Cir. 1995) (finding no evidence that MFC clauses between an 

insurer and providers were anticompetitive); Ocean state Physicians Health Plan, Inc. v. Blue Cross & 

Blue Shield of Rhode Island, 883 F.2d 1101 (1st Cir. 1989) (upholding JNOV finding MFC clauses 

between insurer and providers did not violate Sherman § 2). For a discussion of the competition issues 

surrounding MFC clauses see Baker (1996). See also Salop (1986). 
8 

In general, the “state action doctrine” provides states immunity from antitrust 

scrutiny when they replace competition with a system of regulation.28 States, however, 

cannot authorize private individuals to violate the federal antitrust laws. Thus, federal 

antitrust laws will preempt state regulatory schemes that permit (or compel) private 

parties to engage in conduct that would otherwise constitute a per se violation of the 

Sherman Act.29 Because PH laws create conditions that are likely to facilitate 

coordinated pricing, it should not be surprising that these laws have been challenged as 

being in direct conflict with the Sherman Act. Although not every challenge to PH 

laws has succeeded, the weight of authority suggests that the federal antitrust laws 

preempt these schemes. 

 For example in the two most recent preemption challenges, the Fourth and 

Ninth Circuits struck down PH laws. The Fourth Circuit addressed the validity of 

Maryland PH laws in TFWS, Inc. v. Schaefer,

30 and engaged in a two-step antitrust 

analysis: (1) do the state’s pricing regulations violate the Sherman Act? and (2) if so, 

are they nevertheless protected by the state action doctrine?31 With regard to the first 

step, the court further bifurcated the analysis to determine (a) whether the restraint is 

“unilateral” or “hybrid,” (b) if it is a hybrid, whether it involves a per se violation of 

Sherman § 1.32 The court ultimately concluded that Maryland’s PH scheme “was a 

classic hybrid restraint: the State requires wholesalers to set prices and stick to them, 

but it does not review those privately set prices for reasonableness; the wholesalers are 

thus granted a significant degree of private regulatory power.”33 The Fourth Circuit 

also found that by mandating adherence to an announced price, Maryland’s law 

effectively required per se illegal price fixing.34 Finally, the court held that the law was 

 

28 See Parker v. Brown, 317 U.S. 341 (1943); Cal. Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 

445 U.S. 91 (1980). 

29 See Cooper & Kovacic (2010), for a more detailed discussion of the antitrust preemption doctrine. 

30 242 F.3d 198 (4th Cir. 2001). 

31 Id. at 206. 

32 Id. at 207. 

33 Id. at 208-09. 

34 Id. at 209 (citing Catalano, Inc. 446 U.S. at 649-50 and Sugar Institute v. United States, 297 U.S. 553, 

581 (1936)) 
9 

not immune under the state action doctrine because although the PH scheme was 

pursuant to clearly articulated policy, Maryland failed to “actively supervise” the 

resulting prices.35 The Ninth Circuit’s decision in Costco Wholesale Corp. v. Maleng36

is the most recent appellate decision implicating the legality of PH laws. The court 

followed the framework from TFWS,

37 and found Washington’s PH law to be a hybrid 

restraint38 and to constitute a per se violation of the Sherman Act because it closely 

mimicked an agreement among competitors to adhere to posted prices.39 Accordingly, 

the Ninth Circuit upheld the district court’s ruling that the Sherman Act preempted 

Washington’s PH law. 40

 

2.3 The Twenty-first Amendment

Even if an alcohol regulation is preempted by the federal antitrust laws, it 

nevertheless may be a valid exercise of the state’s power under the Twenty-first 

Amendment. As noted above, section two of the Twenty-first Amendment gives states

control over the “transportation and importation” of alcohol within their borders,

41 and 

the Supreme Court has interpreted this Constitutional provision as granting states 

 

35 Id. at 211. 

36 522 F.3d 874 (9th Cir. 2008). 

37 Id. at 888 (expressing doubt as to whether the hybrid inquiry was any different than the active 

supervision inquiry under Midcal and stating that “Until the Supreme Court further clarifies this 

doctrinally confusing area, however, we will follow the lead of other courts and begin by determining 

whether the restraint is hybrid or unilateral”). 

38 Id. at 894. 

39 Id. at 895. 

40 The result in Costco is similar to that in an earlier Ninth Circuit PH law case, Miller v. Hedlund , 813 

F.2d 1344 (9th Cir. 1987). There, the court noted that although mere agreements to exchange pricing 

information are not per se illegal, the court noted that “agreement[s] to adhere to previously announced 

prices and terms of sale” are. Id. at 1348-49 (citing Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 

(1980)). The court held that conduct pursuant to Oregon’s PH law constituted a per se violation of the 

Sherman Act. Having found that the PH law was subject to preemption, the Hedlund court quickly 

dispensed of it by holding that Oregon did not adequately supervise the resulting prices. Id. at 1348. In 

Battipaglia v. New York State Liquor Authority, 745 F.2d 166 (2d Cir. 1984), the Second Circuit found 

that the Sherman Act did not reach New York post-and-hold regulations. The court noted disagreement 

among courts as to whether the conduct mandated by the PH law could satisfy the agreement element of 

Sherman § 1, but declined to decide the issue. Rather, it assumed arguendo that an agreement could be 

found, but ultimately held the PH law was not preempted because mere information exchanges among 

competitors are not per se illegal. Id. at 175 

41 U.S. CONST. amend. XXI, § 2. 
10 

virtually complete power to structure their liquor distribution system.42 At the same 

time, however, the Court has been clear that Congress used the full extent of its power 

to regulate interstate commerce when it enacted the federal antitrust laws, which 

embodied a national policy in favor of free-market competition.43 Further, the Court 

has been equally clear that a state’s power to regulate alcohol sales within its border is 

not absolute and must yield to Congress’s Commerce Clause power in some 

circumstances.44 Thus, even in circumstances where the Sherman Act preempts a 

regulatory scheme, a court still must determine whether in that particular circumstance 

the state’s constitutionally protected right to regulate alcohol within their borders 

nevertheless trumps Congress’ commerce power, which defines the reach of the 

antitrust laws. 

 In Cal. Retail Dealers Ass’n v. Midcal Aluminum and 324 Liquor Corp. v. 

Duffy, the Court set out a broad framework to weigh these competing interests, asking

“whether the interest implicated by a state regulation are so closely related to the 

powers reserved by the Twenty-first Amendment that the regulation may prevail, 

notwithstanding that its requirements directly conflict with express federal policies.”45

 

In both cases, moreover, the Court noted that the state must substantiate, rather than 

merely assert, the nexus between the regulatory scheme and its Twenty-first 

Amendment interests.46 More recently, the Fourth and Ninth Circuit have imposed 

 

42 Cal. Retail Dealers Ass’n v. Midcal Aluminum, 445 U.S. at 110 (“The Twenty-first Amendment grants 

the States virtually complete control over whether to permit importation or sale of liquor and how to 

structure the liquor distribution system.”). 

43 See Midcal, 445 U.S. at 111 (Congress “exercis[ed] all the power it possessed under the Commerce 

clause when it approved the Sherman Act.”); City of Lafayette v. Lousiana Power & Light Co., 435 U.S. 

389, 398 (1978) (by enacting the Sherman Act, “Congress, exercising the full extent of its constitutional 

power, sought to establish a regime of competition as the fundamental principle governing commerce in 

this country”). 

44 See Granholm v. Heald, 544 U.S. 460, 487 (2005) (“the court has held that § 2 does no abrogate 

Congress’ Commerce Clause powers with regard to liquor”); Capital Cities Cable, Inc. v. Crisp, 467 U.S. 

691, 713 (1984) (“Notwithstanding the [Twenty-first] Amendment’s broad grant of power to the States, .

. . the Federal Government plainly retains authority under the Commerce Clause to regulate even 

interstate commerce in liquor”); Midcal, 445 U.S. at 110 (“Although States retain substantial discretion 

to establish other liquor regulations, those controls may be subject to the federal commerce power in 

appropriate situations.”); Duffy, 479 U.S. at 346 (“The States’ Twenty-first Amendment powers, though 

broad, are circumscribed by other provisions of the Constitution.”). 

45 Duffy, 479 U.S. at 347. 

46 See Midcal, 445 U.S. at 114; Duffy, 479 U.S. at 350. 
11 

additional structure onto this inquiry, articulating the following three-step inquiry: (1) 

whether the expressed state interest one protected by the Twenty-first Amendment, (2) 

whether the regulatory scheme effectively serves this purpose, and (3) assuming the 

first two questions are answered in the affirmative, whether those state interests are 

sufficient to prevail against the federal interest in promoting competition through the 

antitrust laws.47

 The range of interests implicated by the Twenty-first Amendment has never 

been definitively identified, but courts have recognized promoting temperance

48 and 

preventing price discrimination49 as legitimate Twenty-first Amendment objectives. It 

is unclear whether protecting small retailers is a Twenty-first Amendment concern.50

 

In an intergovernmental immunity case, moreover, the Supreme Court has stated in 

dicta that raising revenues and ensuring “orderly market conditions” also were core 

interests under the Twenty-first Amendment.51 In another Twenty-first Amendment 

case, the Eleventh Circuit, however, remarked more recently on the amorphousness of 

this concept: “As for ‘ensuring orderly markets,’ we are not sure what that phrase 

means.”52

 The second step, assessing the efficacy of the regulation in promoting the 

asserted goal, is a fact-intensive inquiry. The state bears the burden of demonstrating 

that its regulatory scheme actually affects the state’s asserted Twenty-first Amendment 

 

47 See Costco, 522 F.3d at 902; TFWS, 242 F.3d at 213. 

48 See Midcal, 445 U.S. at 112; Duffy, 479 U.S. at 349; Costco, 522 F.3d at 902 (“We have no doubt that . 

. . temperance was a valid and important interest of the State under the Twenty-first Amendment.”);

TFWS, 242 F.2d at 213 (noting “the Twenty-first Amendment definitely allows a state to promote 

temperance”). 

49 Miller v. Hedlund, 717 F. Supp. 711, 715 (D. Ore. 1989). 

50 Although the Supreme Court entertained this rationale in both Midcal and Duffy, it was careful to say 

in both cases that it was deciding the cases based on the lack of demonstrated nexus between the 

regulatory scheme and the protection of small retailers. Thus, it was not required to reach the issue of 

whether protecting small retailers “ever could prevail against the federal interest in enforcement of 

antitrust laws.” Duffy, 479 U.S. at 350 n.12; see also Midcal, 445 U.S. at 113-14. 

51 North Dakota v. United States, 495 U.S. 423, 432 (1990). In Midcal, the Supreme Court appeared to 

accept the California Supreme Court’s interpretation of “orderly markets” to mean protection of small 

retailers, but did not consider whether such protection is a legitimate Twenty-first Amendment interest. 

52 Bainbridge v. Turner, 311 F.3d 1104, 1115 (11th Cir. 2002). See also Costco, 522 F.3d. at 1429 n. 23 ( 
12 

interests.53 For example, in both Midcal and Duffy, the Supreme Court relied on state 

court evidentiary findings that both regulatory schemes were ineffective at protecting 

retailers and reducing drinking. In Costco, moreover, despite evidence that Washington 

has one of the lowest per capita alcohol consumption rates in the country, the Ninth 

Circuit upheld the district court’s holding that the state could not satisfy its burden at 

this step because it failed to demonstrate a link between moderation and the regulatory 

scheme.54 Further, in TFWS, the Fourth Circuit found the district court’s assumption 

that higher prices led to lower consumption insufficient for this inquiry and remanded 

to develop an evidentiary record on the relationship between the state’s restrictions on 

competition and their purported Twenty-first Amendment goals. Underscoring the factintensive nature of the inquiry at this step, the district court ultimately found against the 

state,55 but the resolution required two additional trips to the Fourth Circuit to address 

methodological issues.56 Because states defending PH laws have failed at steps one and 

two in the Twenty-first Amendment test, there is no indication of how courts would 

perform the third-step balancing of interests. 

3. The Effect of PH Laws on Alcohol Consumption 

 We begin by examining the impact of PH laws on output to measure their 

competitive impact. If, as economic theory predicts, PH laws weaken incentives for 

wholesalers to compete, they will raise alcohol prices and reduce consumption. Of 

course, regulation that reduces alcohol consumption can produce social benefits – it is 

well established that alcohol is associated with a host of social harms, ranging from 

drunk driving to domestic violence and property crime. To preview, after showing a 

 

53 See Costco, 522 F.3d at 902 (noting that the answer to the second part of the test “may ultimately rest 

upon findings and conclusions having a large factual component.”) (quoting Miller, 813 F.2d at 1352). 

54 See id. 

55 TFWS, Inc. v. Schaefer, 2007 WL 2917025 (D. Md. Sept. 27, 2007). 

56 See TFWS, Inc. v. Schaefer, 147 Fed. Appx. 330, 2005 WL 1898273 (4th Cir. Oct. 5, 2005); TFWS, Inc. 

v. Schaefer, 325 F.3d 234 (4th Cir. 2003). A paradox that seemingly emerges from this second inquiry is 

that the more anticompetitive the regulation, the more likely it is to pass Twenty-first Amendment 

muster. For example, in TFWS, if the state were able reliably to show that its PH laws led to higher 

prices in Maryland than in Delaware, or that the regulations in Midcal and Duffy reduced alcohol 

consumption, the outcome may have been different. Similarly, the outcome of the Twenty-first 

Amendment inquiries in Midcal and Duffy may have changed had the evidence introduced in the lower 

courts revealed the regulatory schemes to protect small businesses from competition. 
13 

robust negative relationship between PH laws and alcohol consumption in this section, 

we next examine the extent to which PH laws generate any offsetting benefits in the 

form of reduced social harms. Specifically, we focus our attention on alcohol-related 

accidents and underage drinking and find no measurable relationship between PH laws 

and these social harms. Taken together, our results suggest that any social benefits 

from PH laws are likely to be very small, which is consistent with the measured 

reduction in consumption occurring primarily in the segment of the population that is 

not likely to engage in the harmful behavior that we examine. 

 3.1 Data and Methodology 

We examine changes in alcohol consumption to identify the effects of PH laws 

on competition. If PH laws create incentives for wholesalers to raise prices – either 

unilaterally or via tacit or express collusion – alcohol consumption should fall. In what 

follows, we estimate various specifications of the following equation: 

ti i t ti ti ti A c PH e , = +α + δ + β1 , + β 2Χ , + ,

, (1) 

where Ai.t is alcohol consumption, PH is a dummy variable equal to 1 if state i had a PH 

law in effect at time t, andα i

and δ t are state and year effects, respectively, and Xi,t is a 

vector of exogenous explanatory variables. We estimate separate regressions for per 

capita (based on state populations ages 14 and older) consumption of beer, wine, spirits, 

and all alcoholic beverages (in ethanol equivalent gallons) as reported by the National 

Institute on Alcohol Abuse and Alcoholism, part of the National Institutes of Health.57

 

X includes controls for additional variables that are likely to be related to alcohol 

consumption or to unobserved heterogeneity correlated with both alcohol consumption 

and the presence of a PH law. Specifically, this vector includes real median household 

income per capita and the percentage of the population that are, respectively: younger 

than age 18, married, white, Evangelical, and Catholic. Demographic data come from 

the Census and religion data come from the Association of Religion Data Archive. The

X vector also includes two variables that are correlated with price – an important 

determinant of consumption – but may reasonably be treated as exogenous: real total 

 

57Available at: 

http://www.niaaa.nih.gov/Resources/DatabaseResources/QuickFacts/AlcoholSales/consum03.htm. 
14 

alcohol taxation measured in dollars per gallon;58 and for the wine and spirits 

regressions, a measure of the Herfindahl-Hirschman Index (HHI) for wine and spirit 

wholesaler concentration.59 We also include variables that indicate the presence of 

certain state laws that may reduce alcohol consumption: a minimum legal drinking age 

of 21 (MLDA21); zero tolerance laws, (ZT), which lower the legal blood alcohol 

content for drivers under 21 to zero; and laws that lowered the permissible adult blood 

alcohol content from .10 to .08 (BAC08). Inclusion of these variables also provides 

symmetry with the social harms regressions in the next section. These data span 1983-

2004. Descriptive statistics are shown in Table 2. 

3.2 Results 

Table 3 presents the main results for the full sample estimated in logs for ease of 

interpretation.60 The first column reports the baseline regressions with only time and 

state effects, which show that PH laws are associated with lower alcohol consumption, 

although only the coefficients on wine and total consumption are significant. The 

second column includes demographic variables and proxies for price. The estimated PH 

coefficients remain negative, but now beer and spirits PH laws have larger and 

statistically significant effects on consumption (-.04 and -.10, respectively). The third 

column adds controls for religion, and all PH law estimates remain negative and 

significant. Further, that the estimated coefficients on Evangelical and Catholic 

generally take on negative and positive signs (although often insignificant), 

respectively, is consistent with the respective stances that these religious groups took on 

prohibition.61 Column 4 includes indicator dummies for the adoption of laws aimed 

directly at alcohol consumption and drunk driving. The estimated effects of PH laws 

remain negative and significant in these specifications, and the estimated effects of 

MLDA21, ZT, and BAC08 (not reported) are generally negative but insignificant. It is 

 

58 This variable is calculated by summing state excise taxes and percentage markups converted to dollar 

amounts per gallon based on the American Chamber of Commerce Research Association (ACCRA) 

prices for wine, beer, and liquor for a given state. 

59 The authors are grateful to Michelle Mullins for providing these data, collected from the Adams Wine 

Handbook (various years). 

60 Linear specifications generate qualitatively similar results. Coefficient estimates for X variables are in 

the appendix. 

61 See DANIEL OKRENT, LAST CALL (2010). Coefficient estimates for tax, HHI, and religion variables 

from various specifications are in the Appendix. 
15 

not surprising that BAC.08 and ZT are not linked to lower levels of consumption, as 

these policies were targeted directly at drunk driving. That MLDA21 is insignificant is 

likely due to the lack of intrastate variation in the sample; by 1983, the first year of the 

sample, all but 4 states had adopted a 21 year drinking age, and all had adopted by 

1988. 

Alcohol consumption – especially spirit consumption – was declining generally 

over the first half of the sample period. To control for any trend in unobserved tastes 

for alcohol Columns 5 and 6 report the results from specifications with linear national 

and state-specific trends, respectively. With the addition of the national trend, results 

remain largely unchanged in terms of magnitudes and significance. The addition of 

state-specific trends, however, causes the PH law coefficients to fall by around half for 

spirits and all alcohol, although these coefficients remain significant. The estimated 

effect of PH laws on wine consumption, however, changes signs and become 

statistically indistinguishable from zero. An examination of the trend coefficients 

suggests that the wine series is not trended. The national trend is negative and 

significant for beer, spirits, and all beverages, but positive and insignificant for wine. 

Similarly, although most of the state-specific trends are negative and significant for 

beer, spirits, and all beverages, they are either positive or statistically indistinguishable 

from zero for wine. Absent a trend to pick up, the correlation between state-specific 

trends, state effects, PH laws, and other right-hand-side variables may make it difficult 

to detect any PH law effect. 

Table 4 presents results from estimating various specifications of (1) after 

removing control states – those states that take full control of distribution of certain 

types of alcohol – from the sample. The rationale for this approach is to ensure that the 

results are not attributable to systematic differences between alcohol consumption in 

control and license states that may bias the estimates. The results remain essentially the 

same in terms of magnitude and statistical significance. As with the full sample, once 

state-specific linear trends are added, the PH law effect falls for each type of drink and 

becomes insignificant for wine. The standard error of the estimate on all beverages 

increases, causing it to also become insignificant at standard levels. 
16 

The estimate of 1

ˆβ is identified from within-state variation of the PH law 

treatment, and the source of this variation for all but two states (Washington adopting a 

PH law in 1995 and Delaware abandoning in 199962) was the elimination of PH laws 

resulting from a court ruling rather than legislative action. Accordingly, it seems 

reasonable to view PH law treatment as exogenous. Nonetheless, as a final robustness 

check, we also control for the possibility that the PH law treatment is correlated with 

unobserved state-level heterogeneity that determines alcohol consumption. It could be 

the case, for example, that populations with underlying preferences for alcohol are 

more likely to repeal PH laws to make consumption cheaper. Such a correlation would 

bias 1

ˆβ downward, possibly leading to the false inference regarding the causal 

relationship between PH laws and lower alcohol consumption.63 We take two 

approaches to address this potential endogeneity problem. 

First, we focus our analysis exclusively on those states that have adopted PH 

laws. If underlying preferences correlated with tastes for alcohol consumption lead to 

PH law adoption in the first place, a focus on these states should help control for

endogeneity. Column 1 of Table 5 reports results of the full model with this limited 

sample and shows that PH laws are associated with lower consumption of each type of 

alcoholic beverage and all beverages combined. Once state-specific trends are 

introduced, however, PH laws appear to have a significant effect only on beer 

consumption, and weakly significant effect on all beverages. Column 2 focuses more 

narrowly on a subset of Northeastern states. Delaware and Massachusetts abandoned 

wine and beer PH laws in1998 and 1999, respectively. That these states are 

geographically contiguous is likely to further address possible confounding 

unobservable variables. In the model without state-specific trends, the estimated PH 

coefficients remain negative and statistically significant, although the magnitude for 

spirits and wine falls by about half. When state trends are introduced, however, all 

 

62 It is possible, however, that the amendments to Delaware’s requirements were driven by 

contemporaneous adverse court decisions regarding PH laws in Massachusetts and Pennsylvania. 

63 Of course, if states that have relatively high alcohol consumption are more likely to adopt PH laws –

for example, in an attempt to temper consumption or to collect taxes and rents on high levels of 

consumption – the bias would go in the opposite direction, which implies that the current estimates are 

conservative. 
17 

estimated PH law effects fall in magnitude so that none are statistically distinguishable 

from zero. In fact, the state-specific trends are significant in only three instances and 

with the exception of the tax and evangelical effects in the spirits regression, none of 

the right-hand-side variables in any regression are significant once state-specific trends 

are introduced. That the introduction of state-specific trends in small samples with 

errors clustered at the state level leads to insignificance is not surprising. Clustering 

essentially reduces the number of independent observations from 174 to 7 (number of 

states in the sample). Further, state trends are collinear with fixed effects and other 

exogenous variables, so it may be asking too much of the data to distinguish between 

the consumption effects of PH laws, state-specific trends, state effects, time effects, and 

other right-hand-side covariates with so few observations and groups.64

 

We also directly control for the possibility that the PH law treatment is 

correlated with the error term in (1) by estimating an endogenous treatment model. We 

model the probability that state i has adopted a PH law at time t as a function of the 

percent of Democratic legislators in a state legislature and the state tobacco excise tax 

rate. Assuming that Democratic law makers are more likely to favor regulation than 

their Republican counterparts, and that states with high tobacco taxes are likely to favor 

policies that enhance the ability to tax alcohol (for revenue or paternalistic purposes), 

these variables should be associated with higher probabilities of adopting a PH law. 

We use maximum likelihood to jointly estimate the first-stage selection probit and 

equation (1).65 Results with and without the inclusion of state-specific trends are 

reported in the final columns of Table 5. For specifications without state-specific 

trends, the PH law estimate for wine is essentially the same as the other specifications 

in terms of magnitude and significance, whereas the estimates for beer, spirits are 

markedly higher.66 Also as with the other specifications, once state-specific trends are 

 

64 For each Northeastern subset specification, the correlation between the fixed effects and the 

independent variables ranges from .99 to 1.0. 

65 Using 2SLS with a first stage linear probability model produces similar results. Coefficients for wine 

and beer regressions are negative and significantly larger but those for spirits are insignificant. 

66 For all specifications, tobacco tax has a positive and significant effect on the probability of PH law 

treatment. For wine, percent democratic has a negative and significant effect on the probability of PH 

law adoption, whereas for spirits, percent democratic has a positive and significant effect on the 
18 

introduced, the estimates becomes smaller and less significant: there is no statistically 

measurable impact of PH laws on wine or beer consumption, and the estimated impacts 

of PH laws on spirits and all beverages fall by over half, and 1/3 respectively. 

Overall, the results presented in Tables 3-5 provide fairly robust evidence of a 

causal relationship between PH laws and reduced alcohol consumption. Specifically, 

the estimates of (1) presented above suggest that PH laws reduce per capita alcohol 

consumption (measured in gallons of ethanol) by 2-8 percent, with wine and spirits 

accounting for larger percentage point reductions (8-10 percent) than beer (4-5 

percent). This finding may be because beer has much lower alcohol content than wine 

or spirits, but accounts for the largest share of ethanol consumption, so even large 

absolute reductions in beer purchases are likely to result in smaller percentage changes. 

Although the findings are largely statistically significant, they suggest a modest 

economic impact. Using 2007 national averages, our results imply that consumers in 

states with PH laws reduce their annual consumption by around 2 bottles of wine, one

bottle of spirits, and 2 six-packs of beer a year. Of course, the NIH alcohol per capital 

measure is based on a denominator of the state population older than 14. In reality, 

however, only a fraction of the population older than fourteen actually drinks; recent 

NIH data find that 64% of those over 18 describe themselves as current drinkers,67 and 

reported drinking is much less prevalent among those 14-18.68 Accordingly, the PH 

laws' impact on per capita assumption among those who consume alcohol is much 

higher, which suggests that the actual economic effect on this group is also likely to be 

higher. Further, given the differential impact that PH laws appear to have on wine, 

beer, and spirits, there are likely second-order welfare losses due to inefficient 

substitution among different types of alcoholic beverages. 

 

probability of PH adoption. Percent democratic is insignificant for beer and all beverages first stage 

regressions. A Wald test does not reject the hypothesis for independent equations for wine and spirits 

regressions. 

67 Percent Distribution of Current Drinking Status, at 

http://www.niaaa.nih.gov/Resources/DatabaseResources/QuickFacts/AlcoholConsumption/dkpat25.htm. 

68 Trends in Alcohol Use Among 10th Graders, at 

http://www.niaaa.nih.gov/Resources/DatabaseResources/QuickFacts/AlcoholConsumption/dkpat23.htm; 

Trends in Alcohol Use Among High School Seniors, at 

http://www.niaaa.nih.gov/Resources/DatabaseResources/QuickFacts/AlcoholConsumption/dkpat10.htm. 
19 

 It is also of interest to note that the tax variables generally are negative and 

significant across specifications, although the results indicate that the demand for 

alcohol is inelastic to tax changes: a one percent increase in the average dollar value of 

alcohol excise taxes will reduce annual per capita alcohol consumption (in gallons of 

ethanol) by around .05 percent, with wine and spirits being more sensitive to tax 

changes than beer. Nonetheless, tax policy appears to be a viable lever for reducing 

average alcohol consumption. Further, the estimated coefficient on wholesaler HHI is 

negative and significant for the wine regressions (-.04), which is consistent with 

increased wine and spirit wholesaler concentration at the state level leading to higher 

consumer prices. 

4. The Effects of PH Laws on Social Harms 

Ordinarily, laws that suppress competition and reduce output are welfarereducing. However, when regulation also reduces harmful externalities, it has the 

potential to produce net benefits. There is a rich empirical literature linking alcohol to 

a host of social harms, including crime, risky teen behavior, sexually transmitted 

diseases, and drunk driving.69 Further, others have found that policies aimed at 

reducing alcohol consumption have had beneficial effects, for example by reducing 

crime, binge drinking, or drunk-driving.70

 

The results in the previous section suggest that PH laws work like a tax on 

alcohol. Several studies have shown a negative relationship between alcohol prices 

(often measured by excise taxes) and socially harmful behavior. For example, Saffer & 

Grossman (1987) and Kenkel (1993) report negative relationships between alcohol 

prices and drunk-driving. Coate & Grossman (1988) find a negative relationship 

between price and self-reported underage drinking, but this result disappears when 

religion and other covariates are introduced. More recently, Markowitz & Grossman 

(1998) find a negative relationship between state beer excise taxes and domestic 

violence. Accordingly, there are empirically-based reasons to believe that PH laws 

have the potential to ameliorate external harms associated with alcohol consumption, 

 

69 See, e.g., Conlin et al. (2005); Chesson et al. (2000); Markowitz & Grossman (1998); Dee (2001); 

Chatterji et al. (2004); Levitt & Porter (2001); Markowitz (2000, 2005). 

70 See, e.g., Carpenter (2007, 2005, 2004); Dee (2001); Eisenberg (2003); Voas et al. (2003). 
20 

thus producing benefits that could offset welfare losses due to higher prices. The extent 

to which PH laws further Twenty-first Amendment concerns, which likely include 

externalities associated with alcohol consumption, is also germane to legal challenges 

to PH laws. In this section we examine the relationship between PH laws and two 

serious social harms associated with alcohol consumption: drunk driving and underage 

drinking. 

4.1 Data and Methodology 

We examine the effect of PH laws on social harms using the same basic model 

as the previous section. Specifically, we estimate the following equation: 

ti i t ti ti ti H c PH e , = +α + δ + β1 , + β 2Χ , + ,

, (2) 

where H is one of several measures of social harm: accidents involving at least one 

driver with an illegal BAC (fatal and non-fatal); self-reported underage drinking and 

driving; and self-reported underage drinking, including binge drinking. We focus on 

drunk-driving accidents and underage drinking because they are arguably the most

important social harms associated with alcohol sales. In 2008, for example, drunkdriving was responsible for 11,773 deaths – 32% of whom were not the driver. These 

accidents, moreover, cost an estimated $51 billion annually.71 Recent years have also 

witnessed an increased recognition of the deleterious effects of drinking by youth. For 

example, in 2007 the Surgeon General released a report highlighting the nature and 

extent of these problems.72 In addition to injuries and death associated with drunkdriving, underage drinking is a leading contributor to other deaths from other injuries, 

and is associated with increased risk-taking (including criminal behavior), academic 

difficulties, developmental problems, and increased risk of future alcohol dependency. 

The accident variables are from the National Highway Transportation Safety 

Administration’s (NHTSA) Fatal Accident Reporting Survey (FARS), and are collected 

annually at the state level. We examine the effect of PH laws on all accidents in which 

the driver had an illegal BAC, all fatal accidents in which at least one driver had an 

 

71 Centers for Disease Control and Prevention, Impaired Driving, at

www.cdc.gov/MotorVehicleSafety/Impared_Driving/imparied-drv_factsheet.htm. 

72 U.S. Dept. of Health & Human Services, The Surgeon General’s Call to Action to Prevent and Reduce 

Underage Drinking (2007). 
21 

illegal BAC, and fatal accidents involving a legally drunk driver between 21-34 (the 

age group responsible for 65% of all fatal drunk-driving accidents).73 For consistency 

with the consumption regressions, we use state-level data from 1983-2004. The 

underage drinking variables are from the Centers for Disease Control’s Youth Risk 

Behavior Surveillance System (YRBSS) annual reports. 74 The YRBSS is a survey of 

high-school students that occurs every two years. Not all states participate, and 

participation varies over the sample period. Accordingly, the number of state-year 

observations ranges from 30-34, and only a core of 13 states report data in every year. 

These data are available only from 1993. 

As in the consumption regressions, the X vector includes demographic, religion, 

and pricing variables that are likely correlated with alcohol consumption, and thus 

indirectly correlated with social harms due to alcohol consumption. Also as in the 

quantity regressions, we also include ZT and BAC08 laws, which are directly aimed at 

deterring drunk driving. We also include estimated vehicle miles traveled per capita as 

reported by the Federal Highway Administration for the accident analysis. All 

regressions using the FARS data include state and year. The YRBSS data provide 

insufficient within-state variation to identify the PH law effect using a fixed-effects 

model: only 2 states in the sample (Massachusetts and Delaware) have changed in their 

PH laws over the relevant time period, only 13 states report every year, and several 

states appear only once or twice in the data. Accordingly, for the YRBSS regressions 

we estimate a pooled OLS model with year and census region dummies. 

4.2 Results 

 The results for the FARS regressions are reported in Table 6. The first column 

in each panel reports specifications that include all three PH laws. Although the beer 

and spirit coefficients are negative, all are highly insignificant. Because the different 

PH laws are correlated,75 the next three columns in each panel report the regression 

with a dummy variable for only one category of PH law, and again no PH law 

 

73 See NHTSA, Traffic Safety Facts 2008. 

74 Carpenter (2004) employs this data at the individual level to measure the effect of zero-tolerance laws 

on underage behavior. 

75 ρ

Spirits,Wine = .67; ρBeer,Wine = .62; ρBeer,Spirits = .37. 
22 

coefficients are significant. Finally, the last column reports the results from a 

specification with an indicator variable equal to 1 if a state has any PH law. This 

estimate is also insignificant. Table 7 reports results from the YRBSS survey data, 

which are very similar to the FARS results. Although the estimated PH law

coefficients are almost uniformly negative, none are statistically distinguishable from 

zero. The inclusion of national and state-specific trends in other regressions (not

reported) yield very similar results.76

Although absence of evidence of a PH law effect may not be equivalent to 

evidence of absence of a PH law effect, it would be difficult to infer from these results 

that PH laws reduce the drunk driving or underage drinking outcomes that we examine. 

Unlike the estimated effect of PH laws on consumption – which is almost uniformly 

negative and significant, and similar in magnitude across various specifications – in the 

social harms regressions, only 25 out of 42 estimated PH coefficients are negative, and 

none are statistically significant. 

To the extent that PH laws act as a tax, absence of a measurable impact on the 

drunk driving accidents and teen drinking is inconsistent with some of the prior results 

discussed above, which find negative relationships between taxes and social harms. 

One potential reason for this seeming inconsistency may be that earlier work on the 

relationship between alcohol prices and the harms we measure was based on samples 

from the 1970s and early 1980s and thus unable to include the effect of ZT and BAC08 

laws. Consistent with more recent research [e.g., Carpenter (2004); Dee (2001)], it 

appears that ZT and BAC08 laws are important sources of reductions in drunk-driving 

and teen drinking. Specifically, our results suggest that ZT and BAC08 laws reduce 

alcohol-related accidents by 7-8% and 4-5%, respectively.77 Further BAC laws appear 

 

76 Because we do not attempt to account for the possible endogeneity of PH laws, these estimates can be 

considered conservative. If the error term in (2) is positively correlated with the PH treatment decision 

equation – for example, because states with high levels of drunk driving accidents or underage drinking 

are more likely to adopt PH laws – then the estimate of the PH law will be biased upward. Additionally, 

we do not control for possible endogeneity of ZT laws and lower legal BAC laws; because these laws 

were promoted by the federal government, they can be treated as exogenous, especially since they are not 

the main variable of interest. Further, the most plausible endogeneity scenario – that states with drunkdriving and underage drinking problems are more likely to adopt ZT and BAC laws – would tend to bias 

the ZT and BAC coefficients in a positive direction. 

77 The BAC08 results for alcohol-related accidents are in a range similar to those reported by Eisenberg

(2003). 
23 

to be associated with a 19% reduction in self-reported teen drinking and driving. 

Surprisingly, we find no apparent effect of ZT laws on teen drinking and driving or 

binge drinking, but ZT laws are associated with a 4-5% reduction in current teen 

alcohol use. Another reason for a lack of finding may be that the price increase 

associated with PH laws is small relative to tax differentials, and thus of insufficient 

magnitude to change bad behaviors in sufficient magnitude to be statistically 

measurable. Of course, it is important to note that although the tax variable was 

negative and often significant in the consumption regressions, it was insignificant in all 

FARS and YRBSS regressions. 

5. Discussion 

 The results in Sections 3 and 4 suggest that PH laws reduce alcohol 

consumption but have no measurable effect on two of the most important social ills

associated with alcohol – drunk driving accidents and teen drinking. As Cook and 

Moore (2002, p.122) note, “those in the top decile of the drinking distribution consume 

more than half of all ethanol. Since alcohol problems are also highly concentrated in 

this group, it seems reasonable to target alcohol-control policies at them.” PH laws do 

not appear to be very successful in targeting this group. The lack of measurable effect 

may be because the reduction in consumption is relatively small, leading to only small 

behavioral changes for those in the top of the alcohol consumption distribution. 

Further, the consumption effects may be concentrated primarily in the segment of the 

population that is not likely to engage in the harmful behavior that we examine. 

Without detailed micro-level data, however, it is impossible to determine the extent to 

which PH laws had differential effects across the distribution of alcohol consumption. 

 These results have important legal and policy implications. First, as discussed 

above, plaintiffs have successfully challenged PH laws on the grounds that they are 

preempted by the Sherman Act. These results are consistent with the view that PH laws 

insulate wholesalers from the downward pricing pressure that comes with competition. 

Unfortunately, data limitations render us unable to determine the relative contributions 

of concerted versus unilateral behavior to this overall reduction in consumption. 
24 

Second, when courts have found PH laws preempted by the Sherman Act, states

have attempted – unsuccessfully to date – to take refuge in the Twenty-first 

Amendment’s grant of power to the states to regulate alcohol distribution within their 

borders by arguing, inter alia, that PH laws are designed to “promote temperance.” 

Our results support this contention only in the narrowest sense – if one interprets the 

Twenty-first Amendment’s temperance objective as focused exclusively on reducing 

average consumption levels per se without regard to the social harms associated with 

consumption. If one takes the view that a societal reduction of alcohol consumption is 

not a policy goal itself, but rather is valuable primarily as a means to reduce social 

harms associated with alcohol consumption, our results undercut states’ attempts to 

defend PH laws as legitimate Twenty-first Amendment regulation. Although PH laws 

reduce average consumption, they appear to have no effect on drunk-driving accidents 

or the teen drinking behaviors that we examine. Further, even if courts were to accept 

any reduction in average alcohol consumption as furthering temperance, our results 

inform the balancing step, where a reduction in non-externality-producing consumption 

would be weighed against the federal interest in competitive markets. 

Third, our findings also cast serious doubt on the wisdom of any proposed 

legislation that would make challenging these and similar state regulation under the 

antitrust laws more difficult. Because our results suggest that PH laws reduce 

consumption without producing a measurable reduction in either drunk driving or 

underage drinking, antitrust enforcement can play a socially beneficial role by 

providing a mechanism to eliminate existing PH regimes and to deter states without 

them from adopting similar laws in the future. Currently proposed legislation seeks to 

decrease the role of antitrust enforcement by raising the burden of proof facing 

plaintiffs challenging state regulation of alcohol pricing and distribution and 

broadening states' ability to defend these regimes under the Twenty-first Amendment.78

 

This legislation would likely deter potential plaintiffs from challenging such laws by 

both increasing the cost of litigation and decreasing the likelihood of success. Our

results suggest that constraining antitrust enforcement through the proposed legislation 

 

78 See, e.g., Comprehensive Alcohol Regulatory Effectiveness (CARE) Act, H.R. 5034, 111th Cong. 

(2010), available at http://frwebgate.access.gpo.gov/cgibin/getdoc.cgi?dbname=111_cong_bills&docid=f:h5034ih.txt.pdf. 
25 

would result in lower consumer welfare for alcoholic beverage consumers with no 

offsetting reduction in social harms. 

Finally, our results indicate that if states desire to reduce alcohol consumption, 

PH laws appear to be inferior policy instruments relative to feasible alternatives such as 

enhanced excise taxes; both policies reduce consumption, but the state can return tax 

revenue to the pubic whereas the supracompetitive prices from PH regimes generate 

monopoly rents that accrue to wholesalers. Further, policies aimed directly at social 

harms – such as zero tolerance and BAC reductions – are also superior to PH laws. 

These policy levers appear to be even more effective than taxes because they reduce 

harmful behavior without punishing marginal consumers who do not contribute to the 

targeted social harms. 

6. Conclusion 

PH laws are one of many sets of regulations that states have enacted since

prohibition that limit competition among alcoholic beverage wholesalers. We find that 

PH laws are associated with lower levels of consumption, but we find no statistically 

measurable relationship between PH laws and either drunk driving accidents or 

underage drinking. Taken together, our results suggest a socially beneficial role for 

antitrust challenges to PH laws and similar anticompetitive state regulation; any policy 

that would make future challenges more difficult is likely to be harmful. If states wish 

to reduce the social ills associated with drinking, our results – which are consistent with 

others – suggest that increasing taxes and enacting laws directly targeting social harms 

are superior policy instruments to PH laws. 

 
26 

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29 

Table 1 

Post & Hold Laws: 1983-2010 

State Wine Beer Spirits 

Connecticut Y Y Y 

Delaware Off in 1999 Y Off in 1999 

Georgia N Y Y 

Idaho Y Y N 

Maine Y Y N 

Maryland Off in 2004 Off in 2004 Off in 2004 

Massachusetts Off in 1998 Off in 1998 Off in 1998 

Michigan Y Y Y 

Missouri Y N Y 

Nebraska Off in 1984 N Off in 1984 

New Jersey Y Y Y 

New York Y N Y 

Oklahoma Y Y Y 

Oregon Off in 1990 Off in 1990 N 

Pennsylvania N Off in 1999 N 

South Dakota Y N Y 

Tennessee N Y N 

Washington On in 1995, 

Off 2008*

 

On in 1995, 

Off 2008*

N 

West Virginia N N Y 

*As a result of a federal appeals court ruing, Washington abandoned their PH laws in 2008. 
30 

Table 2 

Descriptive Statistics 

 Full Sample 

(n = 1,100) 

States With PH Laws 

During Sample 

(n = 350) 

States Never Adopting 

PH Laws During 

Sample 

(n = 750) 

x σ Min Max x σ Min Max x σ Min Max 

Wine .30 .15 .08 .88 .30 .14 .08 .71 .30 .15 .08 .88 

Beer 1.31 .22 .73 2.18 1.20 .13 .91 1.53 1.36 .24 .73 2.18 

Spirits .76 .29 .35 2.45 .73 .20 .35 1.34 .78 .32 .37 2.45 

All Beverages 2.37 .56 1.2 5.22 2.23 .34 1.53 3.22 2.44 .62 1.2 5.22 

Wine Tax .64 .53 .01 4.01 .67 .55 .10 4.01 .62 .52 .01 3.02 

Beer Tax .23 .18 .02 1.07 .18 .12 .03 .48 .25 .20 .02 1.07 

Spirits Tax 3.16 1.97 .74 15.38 3.4 1.92 .74 10.25 3.05 1.98 .78 15.4 

HHI 2432 2370 151 10,000 1859 2033 225 10,000 2699 2469 151 10,000 

Per Capita 

Real Income 

(000) 

22.7 3.8 14.6 32.3 23.2 4.3 16.0 32.3 22.5 3.5 14.6 32.1 

% 

Evangelical 

.16 .13 .01 .56 .15 .13 .01 .47 .17 .12 .01 .56 

%Catholic .19 .13 .01 .63 .21 .14 .03 .52 .19 .12 .02 .63 

%Married .47 .04 .40 .60 .47 .04 .41 .60 .46 .04 .40 .59 

% White .82 .12 .23 .99 .83 .09 .64 .99 .81 .13 .23 .99 

% < 18 .26 .02 .22 .37 .26 .02 .22 .32 

 
31 

Table 3 

Post & Hold Regressions: All States 

(Dependent variable: per capita (age >14) consumption in ethanol equivalent gallons) 

 (1) (2) (3) (4) (5) (6) 

Wine

PH -.09** 

(.04) 

-.08* 

(.04) 

-.09** 

(.03) 

-.09** 

(.04) 

-.09** 

(.04) 

.01 

(.02) 

R

2

.47 .52 .54 .54 .54 .75 

Beer

PH -.02 

(.02) 

-.04*** 

(.01) 

-.05*** 

(.01) 

-.04*** 

(.01) 

-.04*** 

(.01) 

-.04*** 

(.01) 

R

2

.30 .57 .58 .59 .59 .81 

Spirits

PH -.04 

(.05) 

-.10*** 

(.04) 

-.09** 

(.06) 

-.09** 

(.04) 

-.09** 

(.04) 

-.05** 

(.02) 

R

2

.77 .83 .84 .84 .84 .91 

All Alcoholic Beverages

PH -.03** 

(.02) 

-.06*** 

(.01) 

-.06*** 

(.01) 

-.06*** 

(.01) 

-.07*** 

(.01) 

-.03** 

(.01) 

R

2

.64 .80 .80 .80 .80 .89 

Demo + Price 

Factors 

 Y Y Y Y Y 

Religion Y Y Y Y 

Alcohol Laws Y Y Y 

National Trend Y 

State-Specific 

Trends 

 Y 

Notes: N= 1,100. Robust standard errors clustered by state in parentheses. *significant at 10% level; **significant 

at 5% level; ***significant at 1% level. All regressions include state and time effects; price factors includes total tax 

rates (excise + markup) converted to dollar/gallon equivalents and HHI for wine and spirit wholesalers (variable 

excluded for beer regressions); demographic variables include real per capita income, percent white, percent married, 

percent of population under 18; religion variables include percent Evangelical, and percent Catholic; alcohol laws 

includes MLDA of 21, zero tolerance, and legal BAC limit of .08. 
32 

Table 4 

Post & Hold Regressions: License States 

(Dependent variable: per capita (age >14) consumption in ethanol equivalent gallons) 

 (1) (2) (3) (4) 

Wine

PH -.09 

(.06) 

-.08* 

(.04) 

-.08* 

(.04) 

.004 

(.02) 

R

2

.56 .61 .61 .77 

Beer

PH -.02 

(.02) 

-.04*** 

(.01) 

-.05*** 

(.01) 

-.04*** 

(.01) 

R

2

.29 .61 .61 .80 

Spirits

PH -.04 

(.06) 

-.08** 

(.04) 

-.08** 

(.04) 

-.04* 

(.02) 

R

2

.76 .85 .85 .91 

All Alcoholic Beverages

PH -.04 

(.03) 

-.07*** 

(.02) 

-.08*** 

(.01) 

-.03 

(.02) 

R

2

.64 .83 .83 .90 

Demo + Price 

Factors 

 Y Y Y 

Religion Y Y Y 

Alcohol Laws Y Y Y 

National Trend Y 

State-Specific 

Trends 

 Y 

Notes: N = 704 for all beverages license states; N = 924 for wine license states; N = 704 for 

spirits license states; N = 1,078 for beer license states. Robust standard errors clustered by 

state in parentheses. *significant at 10% level; **significant at 5% level; ***significant at 

1% level. All regressions include state and time effects; price factors include total tax rates 

(excise + markup) converted to dollar/gallon equivalents and HHI for wine and spirit 

wholesalers (variable excluded for beer regressions); demographic variables include real per 

capita income, percent white, percent married, percent of population under 18; religion 

variables include percent Evangelical, and percent Catholic; alcohol laws includes MLDA of 

21, zero tolerance, and legal BAC limit of .08.
33

Table 5 

Endogenous PH Treatment Regressions 

(Dependent variable: per capita (age >14) consumption in ethanol equivalent gallons) 

Notes: For wine, PH states and Northeastern PH states, N = 330 and 154, respectively; for beer PH states and 

Northeastern PH states, N = 286 and 176, respectively; for spirits PH states and Northeastern PH states, N = 264 

and 154, respectively; for all PH states and Northeastern PH states, N = 418 and 176, respectively. Full sample 

maximum likelihood estimation, n = 1,100. Robust standard errors clustered by state in parentheses. *significant 

at 10% level; **significant at 5% level; ***significant at 1% level; all regressions include state and year fixed 

effects; total tax rates (excise + markup) converted to dollar/gallon equivalents; HHI for wine and spirit 

wholesalers (variable excluded for beer regressions); real per capita income, percent white, percent married, 

percent of population under 18; percent Evangelical, and percent Catholic. 

PH Law States Northeastern 

PH Law States 

Full Sample MLE 

(1) (2) (3) (4) (5) (6) 

Wine

PH -.10*** 

(.02) 

-.002 

(.02) 

-.06*** 

(.01) 

.01 

(.02) 

-.09*** 

(.02) 

.07 

(.05) 

R

2

.62 .85 .89 .93 - - 

Beer

PH -.04*** 

(.01) 

-.04*** 

(.01) 

-.04*** 

(.01) 

-.01 

(.02) 

-.09*** 

(.01) 

.0003 

(.02) 

R

2

.61 .80 .92 .93 - - 

Spirits

PH -.10** 

(.03) 

-.04 

(.03) 

-.04** 

(.01) 

-.03 

(.02) 

-.15*** 

(.04) 

-.06*** 

(.02) 

R

2

.87 .92 .97 .98 - - 

All

PH -.05*** 

(.01) 

-.02* 

(.01) 

-.05*** 

(.01) 

-.01 

(.01) 

-.09*** 

(.04) 

-.06** 

(.01) 

R

2

.85 .91 .96 .98 - - 

 

State-specific Trends Y Y Y 
Table 6 

Social Harms: Alcohol-Related Automobile Accidents 

Accidents: Driver BAC > .08 Fatal Accidents: Driver BAC > .08 Fatal Accidents Driver Age 21-34: Driver 

BAC > .08 

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) 

PHWine .05 

(.12) 

.005 

(.04) 

 .05 

(.11) 

.01 

(.05) 

.04 

(.15) 

.04 

(.07) 

PHBeer -.02 

(.07) 

.002 

(.05) 

 -.02 

(.06) 

-.002 

(.04) 

.03 

(.08) 

 .05 

(.06) 

PHSpirits -.07 

(.08) 

-.03 

(.04) 

 -.05 

(.08) 

-.02 

(.04) 

-.04 

(.14) 

.02 

(.06) 

PHAny -.01 

(.04) 

-.01 

(.04) 

.03 

(.06) 

BAC .08 -.04* 

(.02) 

-.04* 

(.02) 

-.04* 

(.02) 

.04* 

(.02) 

-.04* 

(.02) 

-.04* 

(.02) 

-.04* 

(.02) 

-.04* 

(.02) 

-.04* 

(.02) 

-.04* 

(.02) 

-.04 

(.03) 

-.04 

(.03) 

-.04 

(.03) 

-.03 

(.03) 

-.04 

(.03) 

ZT -.07*** 

(.01) 

-.07*** 

(.02) 

-.07*** 

(.02) 

-.07*** 

(.02) 

-.07*** 

(.02) 

-.07*** 

(.02) 

-.07*** 

(.02) 

-.07*** 

(.02) 

-.07*** 

(.02) 

-.07*** 

(.02) 

-.08*** 

(.03) 

-.08*** 

(.03) 

-.08*** 

(.03) 

-.08*** 

(.03) 

-.08*** 

(.03) 

R2(overall) .74 .74 .74 .74 .74 .74 .74 .74 .74 .74 .81 .81 .81 .81 .81 

Notes: N= 1,100. Robust standard errors clustered by state in parentheses. *significant at 10% level; **significant at 5% level; ***significant at 1% level. All 

regressions include state and time effects and state-specific linear trends. Also included are an indicator for the years in which the MLDA was 21 in state i, and controls 

for per capita vehicle miles traveled, alcohol tax, real per capita income, percent white, percent married, percent of population under 18; percent Evangelical, and percent Catholic. 
35

Table 7

Social Harms: YRSS Survey Behavior 

Self-Reported Drinking & Driving Current Alcohol Use Binge Drinking 

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) 

PHWine -.16 

(.11) 

-.08 

(.06) 

 -.04 

(.04) 

-.03 

(.02) 

-.05 

(.05) 

-.02 

(.03) 

PHBeer .08 

(.08) 

-.02 

(.05) 

 .01 

(.03) 

-.02 

(.02) 

-.01 

(.03) 

 -.02 

(.03) 

PHSpirits .04 

(.08) 

-.04 

(.06) 

 .002 

(.03) 

-.02 

(.02) 

.07 

(.05) 

-.02 

(.03) 

PHAny -.06 

(.05) 

-.02 

(.02) 

.001 

(.03) 

BAC .08 -.17*** 

(.04) 

-.18*** 

(.04) 

-.18*** 

(.04) 

-.18*** 

(.04) 

-.19*** 

(.04) 

-.08*** 

(.02) 

-.08*** 

(.02) 

-.08*** 

(.02) 

-.08*** 

(.02) 

-.08*** 

(.02) 

-.11*** 

(.03) 

-.11*** 

(.04) 

-.11*** 

(.03) 

-.11*** 

(.03) 

-.11*** 

(.03) 

ZT -.02 

(.05) 

-.01 

(.04) 

-.02 

(.05) 

-.02 

(.05) 

-.01 

(.04) 

-.05* 

(.02) 

-.04* 

(.02) 

-.04* 

(.02) 

-.05* 

(.03) 

-.04* 

(.02) 

-.03 

(.03) 

-.03 

(.03) 

-.03 

(.03) 

-.03 

(.03) 

-.03 

(.03) 

R2 .79 .79 .78 .78 .78 .83 .80 .80 .80 .83 .79 .78 .78 .78 .78 

Notes: N= 193. Robust standard errors clustered by state in parentheses. *significant at 10% level; **significant at 5% level; ***significant at 1% level. All regressions include 

controls for alcohol tax, real per capita income, percent white, percent married, percent of population under 18; percent Evangelical, and percent Catholic. Regressions also include year dummies and census geographic division dummies. 
Table A1 

Regression Results for Additional Explanatory Variables in 

Table 3 

 Specifications from Table 3 

 (2) (3) (4) (5) (6) 

Wine

TAX -.06*** 

(.02) 

-.07*** 

(.02) 

-.07*** 

(.02) 

-.07*** 

(.02) 

-.02 

(.02) 

HHI -.04** 

(.02) 

-.04** 

(.02) 

-.04** 

(.02) 

-.04** 

(.02) 

-.02 

(.03) 

EVAN -.04 

(.06) 

-.05 

(.06) 

-.05 

(.06) 

-.05 

(.05) 

CATH .18 

(.12) 

.17 

(.12) 

.17 

(.12) 

.16 

(.18) 

Beer

TAX -.02** 

(.01) 

-.02** 

(.01) 

-.02** 

(.01) 

-.08 

(.06) 

-.002 

(.03) 

EVAN -.03 

(.03) 

-.03 

(.03) 

-.02 

(.03) 

-.03 

(.03) 

CATH .10* 

(.06) 

.11* 

(.06) 

.11** 

(.05) 

.17** 

(.09) 

Spirits

TAX -.05*** 

(.02) 

-.05*** 

(.02) 

-.05*** 

(.02) 

-.05*** 

(.02) 

-.06** 

(.03) 

HHI .01 

(.01) 

.01 

(.01) 

.01 

(.01) 

.01 

(.01) 

.002 

(.01) 

EVAN .01 

(.05) 

.04 

(.04) 

.01 

(.04) 

-.03 

(.03) 

CATH -.13** 

(.06) 

-.09* 

(.05) 

-.12* 

(.07) 

-.13 

(.12) 

All Alcoholic Beverages

TAX -.02 

(.02) 

-.02 

(.02) 

-.02 

(.02) 

-.02 

(.02) 

-.02** 

(.01) 

HHI .002 

(.01) 

.00 

(.01) 

.002 

(.01) 

.002 

(.01) 

.003 

(.01) 

EVAN -.03 

(.03) 

-.03 

(.03) 

-.03 

(.03) 

-.07*** 

(.03) 

CATH .04 

(.03) 

.04 

(.04) 

.04 

(.04) 

.10 

(.07) 

Notes: N= 1,100. Robust standard errors clustered by state in parentheses. *significant at 10% 

level; **significant at 5% level; ***significant at 1% level. 
 37

Table A2 

Regression Results for Additional Explanatory Variables in 

Table 4 

 Specifications from Table 4 

 (2) (3) (4) 

Wine

TAX -.06*** 

(.02) 

-.06*** 

(.02) 

-.02 

(.02) 

HHI -.03 

(.02) 

-.03 

(.02) 

-.04** 

(.02) 

EVAN -.10* 

(.06) 

-.10* 

(.06) 

-.10** 

(.05) 

CATH .06 

(.07) 

.06 

(.07) 

-.03 

(.18) 

Beer

TAX -.02* 

(.01) 

-.08 

(.06) 

-.002 

(.03) 

EVAN -.05* 

(.03) 

-.02 

(.03) 

-.03 

(.03) 

CATH .08* 

(.04) 

.11** 

(.05) 

.17** 

(.09) 

Spirits

TAX -.05** 

(.02) 

-.05** 

(.02) 

-.07* 

(.04) 

HHI .01 

(.01) 

.01 

(.01) 

-.01 

(.01) 

EVAN .01 

(.04) 

.01 

(.04) 

-.10** 

(.05) 

CATH -.12* 

(.07) 

-.12* 

(.07) 

-.31** 

(.15) 

All Alcoholic Beverages

TAX -.04** 

(.02) 

-.04** 

(.02) 

-.002 

(.02) 

HHI -.01 

(.01) 

-.01 

(.01) 

.01 

(.01) 

EVAN -.03 

(.03) 

-.03 

(.03) 

-.11*** 

(.03) 

CATH .03 

(.04) 

.03 

(.04) 

-.06 

(.11) 

Notes: N = 704 for all beverages license states; N = 924 for wine license states; N = 

704 for spirits license states; N = 1,078 for beer license states. Robust standard errors 

clustered by state in parentheses. *significant at 10% level; **significant at 5% level; 

***significant at 1% level. All regressions include state and time effects;