Package Store Retail Structure and the Regulation of Alcohol Sales

Changes to the regulation of alcoholic beverage sales have occurred in more than a dozen states over the past three decades. These changes potentially alter the retail structure of the alcoholic beverage package store sector by introducing competition from grocery and bigbox stores and increasing costs. This paper reports the findings of a spatial econometric model of changes to alcoholic beverage store regulation in the 48 conterminous states from 1980-2007. We find that permitting Sunday sales reduces the number of retail package store establishments by roughly eight to ten percent under different model specifications. When combining a relaxation of Sunday sales with sales at non-package stores facilities, we observe the loss of just over 25 percent of package stores. This result indicates that any such regulatory change will likely result in only changes in the structure of the industry. No cross border effects of the legislation were observed. As a consequence, regulatory changes have no clear positive fiscal effects as increased sales in one retail sector simply displace another, without boosting cross border sales.