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					                                                                     Valuing psychological and behavioural effects of alcohol dependence : A contingent valuation study
                                                                                                                        Claude Jeanrenaud             1,2,   Sonia Pellegrini1, Nicolas Marmagne1
                                                                                                1Institute    for Economic and Regional Research (IRER), University of Neuchâtel, Switzerland
                                                                                                2Center    for Studies in Public Sector Economics, Bern, Fribourg and Neuchâtel, Switzerland.

Aim of the study                                                  Method: The Contingent Valuation survey                                                                                              Statistical analysis
The aim of the paper is to assess the intangible costs of
alcohol dependency. It is part of a broader study                 A direct approach                                                  Choosing the right approach                                       Internal validity
commissioned by the Swiss Federal Office of Public Health
aimed at valuing the social cost of alcohol abuse in              The direct, or expressed preference, approach –                    Applying the CV method to alcohol dependency runs                 The internal validity of the CV survey was checked                                      The variable CULTURE reveals the attitude of the
Switzerland. Until now there has been no attempt to value         contingent valuation (CV) method or conjoint analysis              into a number of challenges.                                      using a multiple regression model. As predictor of the                                  respondent to the disease : 1 means that the disease
the health implications of alcohol dependency.                    – seems to be the only feasible way to assess the                                                                                    WTP, we used the traditional economic and socio-                                        is perceived as a fatality or a punishment, 0 means
                                                                  human (or intangible) costs of alcohol because it                     The health and social implications of alcohol abuse           demographic variables, such as adjusted income,                                         that the disease is viewed as a hardship to overcome.
The usual way of valuing the cost of drugs – licit or illicit –   would hardly be feasible to observe the pain and                       are numerous and complex; and the cognitive                   gender, age, social status, size of household and area of
is the so-called “cost-of-illness” approach, which is based       suffering of an alcoholic on a market substitute (the                  limitation of the respondents had to be taken into            residence (urban v rural).                                                              If the respondent considers that the quality of life of
on the human capital method. The major shortcoming of             money-risk trade-off of a bartender requiring a higher                 account when designing the questionnaire.                                                                                                             the other family member is greatly reduced (the
this approach is that it only values any implications of          wage because he is at risk of becoming an alcoholic).                                                                                A proxy for the marginal utility of income (MUI) has                                    variable QUALITY is 1).
alcohol which result, directly or indirectly, in loss of                                                                                Several consequences of alcoholism, such as                   been introduced into the model. The standard
                                                                  The CV method is flexible and can therefore be used                    violence in the family, social isolation, disgrace to
production. The psychological and behavioural implications                                                                                                                                             hypothesis is that all individuals have the same income-                                Finally, we expect the WTP to be lower if the relative
                                                                  to value the social cost of the disease - resource and                 the family, etc. are not just facts but also highly
of alcohol abuse are ignored.                                                                                                                                                                          utility function, thus variable income reflects both                                    whom the respondent has imagined being an alcoholic
                                                                  non-resource costs - or only the loss in quality-of-life.              emotive issues.                                               ability-to-pay and differences in the marginal utility of                               is not among the closest relatives (RELATIVE = 0).
                                                                  We have used the latter, the so-called restricted
The second aim of the paper is to test the following                                                                                                                                                   the money transfer. The coefficient of the variable MUI
                                                                  approach. The CV method relies on a hypothetical                      For practical and ethical reasons, the questionnaire
hypothesis: the inclusion of new exploratory variables                                                                                                                                                 is significant and has the expected sign.
                                                                  market to elicit a person’s willingness-to-pay for a                   cannot be administered to alcoholics. The usual
reflecting the attitudes and values of respondents will
                                                                  specific change in their health state. A scenario is                   way of dealing with this problem – the ex ante
significantly improve the capacity of the regression model
                                                                  proposed to respondents, who have to state how                         approach – is not practicable either. Individuals
to predict willingness-to-pay (WTP).                                                                                                                                                                                                          OLS estimate of WTP equation
                                                                  much they would be willing to pay to benefit from a                    from among the general population are incapable of
                                                                  better health state (ex post approach) or from a                       imagining that they might one day become an                                                                                           Linear model               Logarithmic model

Alcohol dependency                                                reduced risk of contracting the disease (ex ante                       alcoholic.
                                                                  approach).                                                                                                                                                                  Variable                         Coefficient     p- value       Coefficient     p-value

In Switzerland there are 300,000 people suffering from                                                                                                                                                                                        Constant                          -109.78         0.457        0.98             0.301

alcohol dependency - 5% of the population. The disease                                                                                                                                                                                        INCOME                               0.091***     0.000        0.51***           0.000

has both behavioural and physiological features. Physical         Scenario and elicitation question                                                                                                                                           MARGINAL UTILITY OF
                                                                                                                                                                                                                                              INCOME (MUI)
                                                                                                                                                                                                                                                                                 218.89**       0.011        0.36***           0.001
dependency is measured by degree of tolerance – the
                                                                  The interviewee, having previously been informed of the health, behavioural and psychosocial consequences of alcohol                                                        CATEGORIES                         161.16**       0.043        0.18*             0.081
need for increased amounts of the product to achieve
                                                                  dependency, is first asked to imagine that a member of their household is an alcoholic. Then they are informed that a                                                       RESIDENCE                          167.00**       0.031        0.24**            0.017
drunkenness – and withdrawal symptoms. Psychological                                                                                                                                                                                          HOUSEHOLD                          367.19***      0.000        0.54***           0.000
                                                                  new, very effective treatment has been approved. To remain effective, the treatment must be administered for the rest
dependency focuses on the user’s need for the product in                                                                                                                                                                                      EXPERIENCE                         206.05***      0.007        0.27**            0.048
                                                                  of the patient’s life. The respondent is asked if they wish their relative to receive the treatment. To elicit their WTP, they
order to face the problems of everyday life and to feel                                                                                                                                                                                       CULTURE                           -268.85***      0.003        -0.23**           0.049
                                                                  then have to state the maximum (monthly) amount they would be prepared to pay to have their relative receive the
well. Alcohol dependency leads to progressive loss of                                                                                                                                                                                         RELATIVE                                                       0.32***           0.001
physical and mental capacities. The development of                                                                                                                                                                                            n                                                184                            184

alcohol dependency may occur over 5-25 years of                                                                                                                                                                                               R2                                                0.310                          0.376
                                                                                                                                                                                                                                              R2 adjusted                                       0.282                          0.347
repeated, excessive consumption.                                                                                                                                                                                                              Prob (F-stat)                                     0.000                          0.000

                                                                  Survey result                                                                                                                                                               Significant at 1% (***), 5% (**), and 10% (*).

Cost categories                                                   240 individuals aged 18+ from the general population in French-speaking Switzerland were interviewed in July 2002.
                                                                  Respondents were selected using the following criteria: gender, age and social stratum.
The social cost of substance abuse can be divided into
three parts. The first part corresponds to the resources          Four respondents refused to opt for the treatment even if it were provided at no cost. Eight individuals wished their                Discussion
that are used for medical treatment, repair of damage to          relative to receive the treatment, but there was no amount they were willing to pay for this. Follow-up questions have               The main aim of the paper was to assess in monetary terms the intangible costs of alcohol dependency. It is done by
property, court decisions and law enforcement, and thus           shown that the well-being of these 8 people would have improved, and therefore we considered these bids as “false                    valuing the loss in quality-of-life for both the alcoholic and those closest to them.
diverted from other beneficial use. These are called direct       zero bids”. The outliers – abnormally high bids – were dropped. The respondents were considered as victims of a                      Contrary to the opinion often expressed by authors of works on cost-of-illness, it is possible to measure the intangible
costs. The second part corresponds to the loss of                 hypothetical bias.                                                                                                                   costs of illness in monetary terms: the contingent valuation method can be used to achieve this.
resources resulting from the rate of increased impairment
                                                                                                                                                                                                       The inclusion of variables that reflect a respondent’s attitudes significantly increases the model’s predictive capacity.
of individuals with alcohol abuse – reduced participation in
the labour force, increased absenteeism – and from
                                                                                                                                       50                                                              Omitting intangible costs leads to a far-from-realistic picture of the social burden of alcohol dependency. The cost in
alcohol-related premature death. These are called indirect        Mean WTP                                                             40
                                                                                                                                                                                                       terms of loss of quality-of-life (CHF1.7bn) exceeds the indirect costs of mortality and morbidity (CHF1.5bn).
costs. The third part of the social cost consists of the
intangible costs – sometimes called human costs – which           The mean WTP is of CHF486 per month or CHF5832
are due to loss of quality-of-life . These intangible costs       annually. The lowest monthly bid was CHF20, the                      30
are real in that they lead to a reduced well-being of the         highest bid CHF4000. On average, the burden of
population, but they do not result in a diversion or a            alcohol dependency, for both the alcoholic and the                   20                                                              Institute for Economic and Regional Research (IRER)
sacrifice of productive resources. If intangible costs are        other members of the household, is close to CHF6000                                                                                  University of Neuchâtel
reduced, no additional resources become available to meet         per case. The prevalence of alcohol dependency in                    10                                                              Pierre-à-Mazel 7, 2000 Neuchâtel, Switzerland
the needs of society. The paper focuses on the non-               Switzerland is 300,000. The annual social burden to                                                                                  Tel. 0041 32 718 14 71
resource costs only.                                              the country of the disease amounts to CHF1.7 billion.                 0                                                              e-mail: sonia.pellegrini@unine.ch ; claude.jeanrenaud@unine.ch
                                                                                                                                            0   500   1000   1500   2000   2500   3000   3500   4000

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