An analysis of the effect of alcohol consumption on household income in Ireland comparing Limited and Full Information Methods of Estimation

Gillian Ormond, Rosemary Murphy


This paper presents a study of the effects of alcohol consumption on household income in Ireland using the Slán 2007 dataset, accounting for endogeneity and selection bias. Drinkers are categorised into one of three categories; non, moderate and heavy drinkers, based on the recommended weekly drinking levels by the Irish Health Promotion Unit. Previous studies into the effect of alcohol on income have not accounted for the fact that alcohol consumption can be viewed as ordered data. This study accounts for the ordinality of alcohol consumption. Limited and Full Information Methods of Estimation are compared and the effect of alcohol consumption on income is estimated using both methods of estimation. Results from both methods of estimation show that income for moderate drinkers is higher than abstainers or heavy drinkers. The difference in income between moderate drinkers and heavy drinkers is much greater when using the FIML method, with income of heavy drinkers being far less than that of moderate drinkers and substantially less than non-drinkers.

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DOI: http://dx.doi.org/10.18103/jeb.v0i2.112


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