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Risks, opportunities and economic impact of excise policy in border trade conditions

Why did the difference in alcohol prices in Estonia and Latvia become unbearable, making it popular to buy alcohol in Latvia? How could this purchase behaviour be changed and how should policies be designed to avoid such situations?

The analysis showed that the markets for strong and light alcohol behaved differently. There were also differences between the types of alcoholic drinks. The analysis showed the drinks for which demand increased for the reason that “forbidden fruit tastes sweeter”, and the drinks, the price fluctuations of which did not deter Estonian people.

Interesting fact: 

The biggest loser of the “alcohol run” was spirit: its exports to Latvia declined. The winner, however, was beer: its exports to Latvia increased by nearly a quarter from 2016 to 2017. Cider also played a role: its exports to Latvia increased by a fifth. The “alcohol run” mostly meant that the cheap alcohol exported across the South-Estonian border would be brought back to Estonia.

Commissioned by: 

Ministry of Finance

Data sources: 

statistical activities of Statistics Estonia (Household Budget Survey, survey of industrial products, foreign trade statistical activity, EKOMAR data), data of Eesti Pank, Tax and Customs Board, Ministry of Finance, National Institute for Health Development

Teostajad:

Märt Leesment, Jaan Õmblus, Kaja Sõstra