Substitution of liquor sales across states

Abstract

This study estimates revenue changes in Idaho state liquor sales from a change in Washington state’s policy. On 1 June 2012, the state of Washington passed a ballot initiative to change existing liquor law. The net effect of the change resulted in increased liquor prices in Washington. This increase in price is hypothesized to raise demand for liquor in bordering counties in Idaho. We estimate that sales increased 10% in Idaho counties that border Washington. This represents $4.86 million dollars in increased sales, which translates into 42 new jobs for the state of Idaho. We find that a change in liquor laws in one state that result in higher prices to consumers has a statistically significant and measurable effect on liquor sales in a bordering state.