Tag: Health economics

Alcohol-Related Costs and Potential Gains from Prevention Measures in Latvia

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Latvia has the highest per capita registered alcohol consumption rate among EU and OECD countries (OECD, 2024). In this brief, we show that the total budgetary (direct) and non-budgetary (indirect) costs associated with alcohol consumption in Latvia in 2021 amounted to 1.3–1.8 percent of the GDP. Non-financial costs from alcohol abuse amounted to a loss of nearly 90 thousand years spent in good health and with a good quality of life. We assess the potential effects of five alcohol misuse prevention measures, all recognized by the World Health Organization (WHO) as effective in reducing harmful alcohol consumption – especially when implemented together. Our analysis focuses on the individual effects of each measure and shows that raising the minimum legal age for alcohol purchases and enforcing restrictions on alcohol advertising and marketing are likely to yield the largest reductions in alcohol-related costs, although these effects will take time to fully materialize.


Alcohol consumption is an important risk factor for morbidity and premature death worldwide. It is associated with over 200 diagnoses recorded in the International Statistical Classification of Diseases and Related Health Problems (CDC, 2021), including liver diseases, injuries, malignancies, and diseases of the heart and circulatory system (WHO, 2018). Alcohol consumption at any level is considered unsafe (Burton & Sheron, 2018).

Globally, an average of 3 million people die each year due to alcohol-related harm, accounting for 5.3 percent of all deaths (Shield et al., 2020). In 2019, alcohol consumption was the main risk factor for disease burden in people between 25 and 49 years of age and the second most important risk factor in people aged 10-24 years (GDB, 2019).

Alcohol use is associated not only with health problems but also with social issues, posing risks to people’s safety and well-being. It causes harm not only to the individual but also to family members and society at large (Rehm & Hingson, 2013). Various sectors, including health, justice, home affairs, and social care agencies, are involved in preventing the consequences of alcohol misuse and reducing the harm this causes. This demonstrates the multiple negative impacts of alcohol use on public health and well-being (Flynn & Wells, 2013).

Latvia has the highest per capita registered alcohol consumption rate among the EU and OECD countries (OECD, 2024), and no clear trend of declining levels has been observed in recent years. Moreover, the consumption of spirits, which can potentially cause more harm than other alcoholic beverages (Mäkelä et al., 2011), is steadily increasing. According to WHO data (WHO, 2024), the high per capita consumption of registered absolute alcohol in Latvia, compared to other countries, is largely due to the consumption of spirits. In Latvia, the share of spirits in total consumption is around 40 percent. By comparison, in the Czech Republic and Austria, where total per capita alcohol consumption is similar to Latvian levels, spirits account for only 25 and 16 percent of total consumption, respectively, while the proportions of beer and wine are higher.

This policy brief reports the estimated costs related to alcohol use in Latvia in 2021, based on the study Alcohol Use, its Consequences, and the Economic Benefits of Prevention Measures (Pļuta et al., 2023). It also provides an overview of the expected benefits from implementing preventive measures, such as raising the minimum legal age for buying alcohol and restricting alcohol advertisements.

Costs of Alcohol Use in Latvia

We estimate three types of costs associated with alcohol consumption:

  • Direct costs: These include budgetary costs related to alcohol consumption, such as healthcare, law enforcement and social assistance costs, as well as expenses for public education.
  • Indirect costs: These costs represent unproduced output in the economy and arise from the premature deaths of alcohol users, as well as their reduced employment or lower productivity.
  • Non-financial welfare costs: This type of cost arises from the compromised quality of life of alcohol users, their families, and friends.

We estimate direct costs by utilizing detailed disaggregated data on alcohol-related budget costs in the healthcare sector, law enforcement institutions (including police, courts, and prisons), costs of public education (e.g., educating schoolchildren about the consequences of alcohol consumption), costs of awareness-raising campaigns, and social assistance costs. For cost categories that are only partially attributable to alcohol consumption, we classify only a fraction of these costs as attributable to alcohol use (e.g., liver cirrhosis is attributable to alcohol usage in 69.8 percent of the cases, so only this fraction of the budget costs on compensated medicaments is attributable to alcohol use). To estimate social assistance costs, including public expenditure on social services, sobering-up facilities, social care centres, orphanages, and specialized care facilities for children and out-of-family care, we conduct a survey among social assistance providers.

To estimate non-budgetary costs, we construct a counterfactual scenario where alcohol is not being overly consumed, ensuring higher productivity, a lower rate of unemployment, and lower mortality within the labour force. Finally, non-financial welfare costs are estimated by measuring the reduction in quality of life or QALYs lost (quality-adjusted-life-years) (for details, see the methodology section in Pļuta et al. (2023)).

The total direct and indirect costs of alcohol abuse in 2021 amounted to 1.3–1.8 percent of Latvia’s GDP. In comparison, revenues from the excise tax on alcoholic beverages in 2021 accounted for 0.7 percent of the GDP.

Direct costs, which entail expenses directly covered by the state budget, comprised 0.45 percent of the GDP. Among these costs, healthcare expenses were the largest component, constituting 37.8 percent  of total direct costs and 2.7 percent of general government spending on healthcare. Nearly half of these healthcare costs were attributed to the provision of inpatient hospital treatment for patients diagnosed with alcohol-related conditions. Another significant component of budgetary costs is associated with addressing alcohol abuse and combating illicit trade through law enforcement, accounting for 31.9 percent of total direct costs and 6.5 percent of general government spending on public order and safety.

Alcohol-related indirect costs amount to 0.9-1.3 percent of Latvia’s GDP. Despite not being directly covered by the state budget, they represent unproduced output and thus entail economic losses. The primary components of these indirect costs are linked to decreased output resulting from higher unemployment and reduced economic activity (0.6-0.8 percent of the GDP), as well as decreased output due to premature death among heavy drinkers (0.2-0.4 percent of the GDP). Notably, indirect costs attributed to alcohol misuse by males constitute almost two-thirds of the total indirect costs.

Finally, the non-financial costs from alcohol abuse in 2021 are estimated to reach 88 620 years spent in good health and with a good quality of life. These losses primarily stem from the distress experienced by household members from alcohol users, the decline in the quality of life among alcohol users themselves, and the premature mortality of such individuals.

The Effects of Preventive Measures

We consider five alcohol misuse preventive measures, all of which are included in the list of WHO “best buys” policies that effectively reduce alcohol consumption (WHO, 2017):

  • Reducing the availability of retail alcohol by tightening restrictions on on-site retail hours
  • Raising the minimum legal age for alcohol purchase from 18 to 20 years
  • Increasing excise tax on alcohol
  • Lowering the maximum allowed blood alcohol concentration limit for all drivers from 0.5 to 0.2 per mille (currently 0.2 for new drivers and 0.5 for all other drivers)
  • Restricting alcohol advertising and marketing

Our estimates of the expected reduction in alcohol-related costs resulting from these measures are based on two main components:

  • (1) our own estimates of alcohol-related costs in Latvia, as described above, and
  • (2) external estimates of the impact of the five misuse preventative measures on alcohol consumption derived from existing literature on other countries.

We then apply these external estimates to the calculated alcohol-related costs and Latvian data on alcohol consumption to determine the estimated impact for Latvia (for further details, see the methodology outlined in Pluta et al. (2023)).

Our findings indicate that the most substantial reduction in direct costs attributed to alcohol misuse is anticipated through raising the minimum alcohol purchase age to 20 years (yielding an 11.4-15.8 percent estimated cost reduction). Previous literature has shown that early initiation of alcohol use significantly increases the likelihood of risky drinking, and that risky drinking during adolescence significantly increases the risk of heavy drinking in adulthood (Betts et al., 2018; McCarty, 2004). Hence, raising the minimum legal age for alcohol purchase represents an effective tool to reduce alcohol consumption also among the adult population.

Another highly effective measure to reduce alcohol consumption is imposing restrictions on advertising, which results in a 5.0-8.0 percent estimated reduction of direct costs. There is a large body of literature indicating that alcohol advertising increases alcohol consumption among young people, as well as significantly increases the likelihood of alcohol initiation among adolescents and young adults (Noel, 2019; Jernigan et al., 2017). Also, among the adult population, alcohol consumption decreases with stricter advertising restrictions (see Casswell, 2022; Rossow, 2021).

However, it is important to emphasize that the full impact of both above discussed preventative measures will only manifest in the long run.

The Effect of Illicit Markets

It is often argued that illicit alcohol markets, which provide access to cheaper alternative alcohol than registered commercial markets, can limit the effectiveness of preventive measures on overall alcohol consumption (Rehm et al., 2022).

To explore the interplay between illicit alcohol circulation and alcoholism prevention measures we conduct semi-structured interviews with experts regarding the prevalence of illicit alcohol circulation in Latvia and strategies to mitigate it.

While our main findings emphasize the inherent challenge of precisely quantifying the size of the illicit alcohol market, our analysis suggests that the share of illicit alcohol in total alcohol consumption in Latvia is relatively low. We also conclude that the size of the illicit alcohol market has been diminishing in recent years, and that public interest in engaging with illicit alcohol is declining. Given these findings, the current scope of the illicit market is unlikely to substantially undermine the efficacy of alcohol control measures. This is especially true as the consumers of illicit alcohol represent a specific group minimally affected by legal alcohol control measures in the country.


Our findings underscore the substantial costs associated with the large alcohol consumption in Latvia. In 2021, budgetary (direct) and non-budgetary (indirect) costs reached 1.3–1.8 percent of Latvia’s GDP. Furthermore, non-financial costs from alcohol abuse represent a loss of nearly 90 thousand years spent in good health and with a good quality of life.

Furthermore, non-financial costs from alcohol abuse represent a loss of nearly 90 thousand years spent in good health and with a good quality of life. This stems primarily from the distress experienced by alcohol users’ household members, and the decline in life quality and premature mortality among users themselves.

Latvia stands out as a country with exceptionally high levels of absolute alcohol consumption per capita compared to other countries. Policy makers should implement effective preventive measures against alcohol consumption to maintain the sustainability of a healthy and productive society in Latvia.


This brief is based on a study Alcohol Use, its Consequences, and the Economic Benefits of Prevention Measures completed by BICEPS researchers in 2023, commissioned by the Health Ministry of Latvia (Pļuta et al., 2023).


Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Can the Baby- and Woman-Friendly Maternity Wards Save Lives?

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Improving the health and well-being of mothers, infants and children has been an important public-health goal for many countries, which is reflected in the Millennium Development Goals (4 and 5), set by the United Nations. The well-being and health of mothers, infants and children determine future population health and thus public health challenges as well as economic development prospects. Although Ukraine and the other countries of the Former Soviet Union have fared well compared to the less developed countries of Asia, Africa and Latin America, their maternal and infant mortality and morbidity rates are 3 to 5 times higher than those in the European countries (including those of the Former Socialist block). There are many factors behind this situation. Nevertheless, a lot can be done to improve maternal and infant health by simply changing the way labor and delivery services are provided. New evidence-based medicine (EBM) standards introduced by the Mother and Infant Health Project (MIHP) are more baby- and woman-friendly and include: partner deliveries; avoidance of unnecessary C-sections, amniotomies and episiotomies; use of free position during delivery; immediate skin-to-skin contact; early breastfeeding; and the rooming-in of mothers and newborns. The impact of the Project culminates with 3 mothers’ and 11 newborns’ lives saved every two years in an average participating region.

Infant mortality/morbidity has often been a focus of health economics and medical research as a major indicator of a country’s well-being. In contrast, maternal health outcomes have been much less investigated. There are several potential reasons for such negligence. One is that the rates of maternal deaths are quite low in developed countries. The second is attributed to the difficulty of measuring maternal health outcomes in developing countries where the rates of maternal mortality are particularly high. Nevertheless, the issue of maternal health attracts considerable attention from society due to the fact that most of maternal deaths and health deteriorations are preventable. Moreover, recent evidence demonstrates that improvements in health outcomes for mothers and infants are not as much related to the availability of care (structural quality), as to the way this care is provided (process quality) (Barber and Gertler, 2002). Furthermore, some studies find that access to low quality providers in fact contribute to higher child morbidity and mortality (Sodemann et al., 1997).

Although the population health in Ukraine compares favorably to the situation in the developing world, it is still lagging far behind the developed countries in terms of maternal and infant mortality and morbidity. During the latest years, the level of anemia among pregnant women has increased 4.5 times, maladies of genital urinary system about 3 times, and diseases of blood circulation system 2 times. The average maternal mortality ratio fluctuates around 18-22 women per 100,000 live births, which is 3.5 times higher than in the EU. At the same time, infant mortality (9.5/1000) is two times higher than that in the EU, while the rate of stillbirth (16.89/1000) is four times higher. Additionally, the incidence of congenital anomalies of newborns has increased over time and reached the number of 2878 per 100,000, which is 77% higher than the EU average.

Another alarming problem related to maternal health is persistently high rate of abortions, which most likely originates from ignorance in modern family planning methods. In contemporary Ukraine, 71% of pregnancies end up in abortions. Although the number of abortions decreased twice between1991 and 2003 (from 1532/1000 live births to 728/1000 live births respectively), the incidence is still 3.5 times higher than that in the EU (Center of Medical Statistics of Ukraine 2007).

Mother and Infant Health Project Description

The Mother and Infant Health Project is an eight-year project advocating evidence-based medical practices aimed to improve women’s reproductive and newborns’ health. With funding from the USAID and private sources, and with the support from the Ministry of Health of Ukraine, the project has been implemented by the JSI Research and Training Institute. The first phase of the project was initiated in September 2002 in four regions of Ukraine, but the first four maternities joined the Project in mid-December 2003. By the end of 2006, the Project had expanded to 20 maternity hospitals in twelve pilot regions.

Following the Millennium Development Goals (MEU, 2005), the MIHP pioneers to introduce new evidence-based medicine (EBM) standards: partner deliveries; avoidance of unnecessary C-sections, amniotomies and episiotomies; use of free position during delivery; immediate skin-to-skin contact; early breastfeeding; and the rooming-in of mothers and newborns. In addition, the Project actively supports the provision of training on effective perinatal technologies for the staff of the MIHP maternities, development of “centers of excellence” that serve as models in training/education of medical practitioners of the corresponding oblast, and organizing a health awareness campaign on healthy lifestyles. The MIHP also aims to reinforce liaisons with local governmental institutions.

Furthermore, the Project works on integration of the EBM standards into a package of perinatal practices throughout Ukraine. It also targets revision of the current curricula for medical universities and colleges in order to increase the evidence base of educational programs for medical students and health care providers.

The MIHP in Ukraine belongs to a family of maternal and infant health improving initiatives throughout the world and builds upon their experience, JSI Mother Care (1998-2000) being the largest among them. However, the MIHP in Ukraine is unique both with respect to the institutional setting and to its scope and length, which allows for rigorous evaluation. Most of the earlier projects implemented by the JSI have mainly focused on specific issues (e.g. pregnancy of adolescent girls in Uganda and Zambia, anemia in Malawi) and have been short-term (the longest have been two-year projects in Egypt, Pakistan, and Zambia).

The Impact of the Mother and Infant Health Project

The evaluation of the impact of the first phase (2002-2006) of the Mother and Infant Health Project in Ukraine allows for an identification of improvements in the maternal and infant health outcomes due to enhancements in the quality of labor and delivery services. The identification of the quality improvement effect has been possible for two reasons. First, the basic perinatal and obstetrics care is universally available in Ukraine. Hence, the estimated impact of the small region participating in the MIHP can be attributed to the improvement in medical technologies rather than the availability of the services per se. Second, the variation in the project participation over time and across regions allows for control of the overall population health trend in the country.

Taking into account the effect of the other maternal health programs and personnel training outside the Project, Nizalova and Vyshnya (2010) find that the MIHP impact is in general health improving. Decreases in both maternal and infant mortality and morbidity in participating regions are more pronounced after the start of the Project. Among the infant health characteristics, the MIHP impact is observed for stillbirths and infant mortality and morbidity resulted from deviations in perinatal period and congenital anomalies.

Concerning maternal health, the MIHP is most effective in combating anemia, blood circulation, veins, and urinary-genital system complications, and late toxicosis. The analysis suggests that the effects are due to early attendance of antenatal clinics, lower share of C-sections, and greater share of normal deliveries.

For some outcomes (maternal mortality, normal deliveries, and anemia) there exists a significant effect of the MIHP trainings (without joining the Project), although it is about twice as small in magnitude for normal deliveries and anemia than the direct MIHP impact.

Cost-Benefit Considerations

A comprehensive cost-benefit analysis of the MIHP project is limited, since the majority of maternal and infant health indicators are hard to assess in monetary terms (e.g. increase in early neonatal visits of mothers; decrease in the number of cases of late toxicosis and complicated deliveries; decrease in infant morbidity due to various reasons etc.). Therefore, the focus is on the most “tangible” cost effectiveness indicators: (i) average annual per maternity cost of the Project and (ii) average annual per maternity “tangible” benefits.

The average annual per maternity cost is about 60,000 USD and it is calculated as an overall cost of the first phase of the project – 6 million USD – distributed over 20 treatment sites during 2002-2006, including the first year of the Project setup. Set of “tangible” benefits includes savings due to (i) a switch from C-sections to vaginal deliveries (cost savings of around USD 2,500 per maternity per year), (ii) a switch away from medicine-intensive ways of leading both C-sections and vaginal deliveries (around USD 65,000 per maternity per year), and (iii) saved lives of mothers and infants due to the implementation of the MIHP practices (around USD 5.8 million per maternity per year ).

Overall, the project cost to benefit ratio is 1 to 97 (60 to 5,847 thousand USD) if one takes into account the value of lives saved and it is 1 to 1.08 (60 to 65 thousand USD) if one considers only cost savings due to change in C-section and vaginal delivery practices and the switch away from C-sections to vaginal deliveries. The latter represents the lowest bound of the Project’s benefits since it does not take into account any health-improving impact of the MIHP. Although the range is quite wide and this preliminary calculation suffers from several limitations, it seems unlikely that given the estimated impact the true costs would exceed the true benefits.


  • Barber, Sarah L and Paul J Gertler. 2002. “Child Health And The Quality of Medical Care.” University of California-Berkeley Working Paper .
  • Giergiczny, Marek. 2008. “Value of a Statistical Lifethe Case of Poland.” Environmental and Resource Economics 41 (2).
  • MEU. 2005. “Millennium Development Goals. Ukraine.” Ministry of Economy of Ukraine .
  • Olena Y. Nizalova & Maria Vyshnya, 2010.”Evaluation of the impact of the Mother and Infant Health Project in Ukraine,” Health Economics, John Wiley & Sons, Ltd., vol. 19(S1): 107-125.
  • Sodemann, M., M.S. Jakobson, I.C. Molbak, I.C. Alvarenga, and P. Aaby. 1997. “High mortality despite good care-seeking behavior: a community study of childhood deaths in Guinea-Bissau.” Bulletin of the World Health Organization 3 (75):205–12.