Fixed-effect versus random-effects meta-analysis in economics: a study of pass-through rates for alcohol beverage excise taxes

This paper compares two methods for meta-analysis: fixed-effect models and random-effects models. Both models are applied to pass-through rates of excise taxes on alcohol beverages. Using a sample of estimates from 30 primary studies, weighted means are first reported for each method and compared against a fully- passed tax or rate of unity. Dispersion and heterogeneity statistics are used to assess the performance of each method. Second, means and dispersion statistics are reported by subgroups for country source; beverage (beer, wine-spirits); and published status. Third, tests are conducted for publication selection bias using funnel plots and regression asymmetry tests. Fourth, three procedures are undertaken to reduce selection bias: trim-and-fill; cumulative meta-analysis; and meta-regressions. Based on a variety of tests and procedures, three conclusions are reached. First, a random-effects model is more appropriate for these data, reflecting diverse estimates of pass-through rates. Second, pass-through rates are approximately unity regardless of beverage. Third, greater attention needs to be given to choice of model for meta-analysis in economics.