Friday beer post: "alcohol as a commodity group is a necessity"

THE DEMAND FOR BEER, WINE AND SPIRITS: A SURVEY OF THE LITERATURE

James Fogarty, University of Western Australia, Agricultural and Resource Economics

KEYWORDS: Alcohol • Income elasticity • Meta-regression analysis • Price elasticity

ABSTRACT

Abstract. The demand for alcohol literature is vast and much conflicting information about the nature of the demand for alcoholic beverages has been published. This paper presents a survey of the literature, and then uses the technique of meta-regression analysis to establish insights into the nature of the demand for beer, wine and spirits. Unlike previous meta-studies of the demand for alcoholic beverages this study adjusts for the precision of each elasticity estimate. The analysis presented suggests reported elasticity estimates will be influenced by such factors as estimation technique, data frequency and time period under consideration. With respect to time, the findings suggest that the demand for alcoholic beverages has become less inelastic since the mid-1950s and that the income elasticity has been falling since the mid-1960s. The analysis also found support for the idea that alcohol as a commodity group is a necessity, and that consumers respond to price discounting with inventory behaviour rather than true substitution behaviour. Little support is found for the idea that the demand for alcoholic beverages varies fundamentally across most countries, although wine may be an exception.

via www3.interscience.wiley.com