Psychological Distress and Problem Drinking

We examine the influence of harmful alcohol use on mental health using a flexible two-step instrumental variables approach and household survey data from nine countries of the former Soviet Union. Using alcohol advertisements to instrument for alcohol, we show that problem drinking has a large detrimental effect on psychological distress, with problem drinkers exhibiting a 42% increase in the number of mental health problems reported and a 15% higher chance of reporting very poor mental health. Ignoring endogeneity leads to an underestimation of the damaging effect of excessive drinking. Findings suggest that more effective alcohol policies and treatment services in the former Soviet Union may have added benefits in terms of reducing poor mental health.