Int. J. Environ. Res. Public Health 2010, 7 1903 which is determined by alcohol price ( ), income ( ), demographic factors ( ) and unobserved individual factors. The demand function for health-good is defined similarly, i.e., , where is the price of healthy-good, and other notations are the same as in equation (2). Thus, substituting demand functions of both alcohol and healthy-good into equation (1), with a normalized price ( a reduced-form model of child health is: (3) (3’) (4) (5) Researchers have found that alcohol taxes (T) can well represent alcohol prices [22]. Hence, Equation (3) changes to: Equation (3’) shows the direct impact of increase in alcohol taxes on infant health. Many researchers used beer tax alone as an explanatory variable, for the reason that all U.S. states apply specific excise taxes to beer and taxes on wine and distilled spirits in license states [22]. However, reports have shown that wine and liquor consumption increased significantly over the past few decades [23]. Additional evidence indicates that more and more Americans enjoy wine and distilled liquor, and even prefer wine to beer [24]. Further, while beer is more favored by men, wine and liquor tend to be favored by women [25]. Therefore, this study distinguishes taxes on all three types of alcohol: beer, wine and liquor. Specifically, the estimation is based on Equation (3’): , where i, s, and t index individual, state and conception year, respectively. Taxes on beer, wine and liquor taxes (i.e., Tj) are included one-by-one into the model to avoid the multicollinearlity problem. λ1 and λ2 control for state- and year-fixed-effects. ξ is a random error with zero mean and finite variance. When outcome variables are continuous, an ordinary-least-square estimation is estimated; when they are discrete, a probit model is examined. One could argue that even if the effects of the alcohol taxes on women’s behaviors and on birth outcomes are consistent with our hypothesis, other factors, such as macroeconomic conditions, could drive the improvement. To remove this concern, the estimation model includes real per capita income representing state-specific macroeconomic environments during the birth years studied. 2.2. Data Estimation of birth outcomes (Equation (4)) is based on data from the Natality Detailed Files (1985–2002), a U.S. census of births derived directly from birth records. Infant health, mothers’ education, marital status, age, and race/ethnic group were included. Fathers’ information is available only for some years and thus was excluded. Samples were restricted to children whose health outcomes were available. In addition, children whose mothers were older than 44 years were excluded since decision of having a child for these women may be different from mothers with regular ages. The conception year in the Natality files is coded according to the month of the last menstrual period.