Estimating the Educational Impact of Prohibition Laws: A Natural Experiment in India

Abstract

This study examines the unintended educational consequences of alcohol prohibition in Bihar, India, focusing on its impact on student dropout rates. While alcohol prohibition policies are implemented to address public health and social concerns, their effects on educational outcomes remain understudied, particularly in developing nations. We use the alcohol prohibition law promulgated in 2016 in a large Indian state (Bihar, population: 130mn), as a natural experiment to estimate this effect. We conduct a difference-in-difference technique to show that the prohibition significantly increased dropout rates in school-going students, with males experiencing higher increases than females. The increase in dropout rates due to prohibition is because students often get employed for bootlegging activities in the regions of the ban. Even though this effect disappears after a few years, the cost imposed on depriving children from school is high. These results therefore suggest that while prohibition may aim to improve social welfare, it can have unexpected negative consequences on educational outcomes. This study contributes to the growing literature on prohibition policies by establishing a novel connection between alcohol bans and educational disruption, highlighting the need for comprehensive policy approaches that consider potential unintended effects on vulnerable populations.