Habit and Heterogeneity in the Youthful Demand for Alcohol

Abstract

Observed patterns of youthful drinking indicate substantial persistence. This paper analyzes how much of that persistence reflects the actual development of a habit, and how much is due to unobserved aspects of the individual and the environment. The role of restrictions on alcohol availability, both in the current period and in adolescence, is also explored. We find that much of the observed persistence represents habit formation, and not unobserved characteristics. Consequently, restrictions on availability, particularly at an early age, alter subsequent patterns of alcohol consumption and abuse.