Alcohol, deterrence, and crime: causality and policy lessons from Korea

The relationship between alcohol use, crime and public policy interventions is a pressing area of study in the policy sciences. This article compares the effects of alcohol price control policies and crime deterrence policies by type of crime through a case study of South Korea. Specifically, an instrumental variable was introduced to address the problem of endogeneity between alcohol consumption and crime. Instead of using the alcohol tax rate, this study's instrumental variable was derived from the vertical restraint structure of the Korean distilled liquor industry. The results of the study's empirical analysis show a significant and negative relationship between the arrest rate and violent, property, and economic crimes. Alcohol consumption is observed to have a positive relationship with violent crime only. Additionally, prevention activities deployed by the police were found to have a negative relationship with property crime, while the prosecution rate was determined to have a negative relationship with economic crime. Furthermore, as opposed to deterrence policies, an alcohol control policy through higher alcohol tax rates emerged as more effective for reducing alcohol-related crime, and a specific rate tax was found to be more effective than an ad valorem tax for deterring alcohol-related crime.