Re-examining the economic determinants of alcohol consumption in Canada: controlling for the presence of common correlated effects

Alcoholic beverages represent both an important source of revenue and a driver of expenditure for provincial governments in Canada. As a result, the pricing of alcoholic beverages has substantial public policy implications. In this context, we re-examine existing work estimating the demand for three classes of alcoholic beverage (beer, wine, and spirits) by controlling for common correlated effects. The results reveal that any conclusions regarding the government’s ability to influence alcohol consumption is sensitive to the assumption that the relationship between the demand for alcoholic beverages and economic variables is identical across provinces.     

Is there a link between alcohol consumption and the level of poverty?

In many developing countries, in addition to household income, there are a number of other socio-economic determinants of poverty. One such hidden socio-economic factor is alcohol consumption and some studies argue that there is a link between alcohol consumption and poverty. The main aim of this study is to measure the effects of alcohol consumption on the level of poverty in a systematic way. Using Sri Lanka as a case study, this article demonstrates that the consumption of various types of alcoholic beverages, particularly, the illegal beverages, has a significant positive association with the level of poverty. The findings of this study suggest that, in Sri Lanka, the consumption of illegal alcoholic beverages increases the likelihood of being in a poor household by 2–3%. The results of this study also find that households who are characterized as nonpoor but are just above the poverty line behave more like the poor rather than the nonpoor in terms of alcohol consumption. Some of the conclusions from this Sri Lankan case study can be applied to other developing countries.     

An investigation into the demand for alcoholic beverages in Canada: a choice between the almost ideal and the Rotterdam models

In this article I investigate the historical pattern of interactions in the demand for three categories of alcoholic beverages in Canada, using both the differential Almost Ideal and the differential Rotterdam demand systems. I evaluate these models based on several decision criteria including model encompassment (based on the J-test), structural stability, conformity with demand theory and the credibility of the estimated price and income responses, in an attempt to determine which of these models is better suited for explaining the demand for alcoholic beverages. The results reveal that both models satisfy the restrictions of demand theory and of structural stability but the Rotterdam model is preferable on grounds of the remaining two criteria.     

Empirical Regularities in Cross-Country Alcohol Consumption*

This paper analyses the demand for the three beverages: beer, wine and spirits, within alcohol, at a cross-country level for 10 countries: Australia, Canada, Finland, France, Japan, New Zealand, Norway, Sweden, the UK and the US. A number of empirical regularities were found at the cross-country level. This includes: (i) the demand theory hypotheses, homogeneity and symmetry are generally acceptable; (ii) the additive utility hypothesis is also acceptable even for such narrowly defined commodities; (iii) in nine out of the 10 countries, beer is considered as a necessity, in half of the countries wine is a necessity and in all the countries spirits are a luxury; and (iv)in all the countries, the demand for beer, wine and spirits are price inelastic.     

Marijuana and alcohol: Evidence using border analysis and retail sales data

We use retail scanner data on purchases of alcoholic beverages across US counties for 2006 to 2015 to study the link between medical marijuana laws (MMLs) and alcohol consumption. To do this, we exploit differences in the timing of marijuana laws among states and find that they are substitutes. We show that unlike traditional national-level analysis, focusing on contiguous-border county pairs provides unbiased estimates of the effect of MMLs on alcohol sales. Specifically, alcohol sales in counties located in MML states decreased by 12.4%. Results are robust to including placebo effective dates for MMLs in treated states.     

Understanding alcohol consumption across countries

ABSTRACT

With unpublished data from the International Comparison Program that cover the consumption of three alcoholic beverages in over 150 countries, we analyse drinking patterns around the world with an index-number approach, by estimating a demand system, and by studying the interaction among beverages in generating utility. We consider a separate demand system for each income quartile and find that tastes are not too different across quartiles. Broadly speaking, the results are robust to rolling sub-samples of countries, an alternative demand model and sample selectivity issues. The differences in the cost of alcohol across countries are also investigated, as is its role in affecting the degree of price-sensitivity of consumption.     

Wine Tax Reform: The Impact of Introducing a Volumetric Excise Tax for Wine

The recent Henry tax review recommended substantial changes to Australian alcohol taxation policy. Here, the implications for the Australian wine industry of the Henry tax review's recommendations are explored using a computable general equilibrium model. The results show that: (i) replacement of the Wine Equalisation Tax (WET) with a revenue‐neutral volumetric excise tax would have a small negative impact on the wine industry; (ii) removal of the WET rebate would have a substantial negative impact on small wineries; and (iii) applying the packaged beer excise rate across all alcoholic beverages would have a notable negative impact on the wine industry.     

Forecasting the consumption of alcoholic beverages in Finland: A box-Jenkins approach

In this report the results of identifying, estimating and diagnostically checking short-term rational distributed lag (transfer function) models for forecasting the consumption of alcoholic beverages other than beer in Finland are reviewed and compared with some other Scandinavian studies. The output of models is the logarithm of the monthly consumption of alcoholic beverages while the only specified input is the logarithm of the price index of alcoholic beverages. Other explanatory variables are included in the ARIMA noise. The importance of the price variable is demonstrated by comparing ex post predictions obtained using different methods.     

The demand for home-produced and imported alcoholic beverages in Cyprus: the AIDS approach

The purpose of this paper is to investigate the demand and its composition between home-produced and imported for alcoholic beverages in Cyprus. The methodological approach used is the Almost Ideal Demand System (AIDS), both in static and dynamic terms. Empirically, the AIDS, both in its static and dynamic version, was estimated using time-series (1970-1992) for three sets of data which include: (1) alcoholic beverages (wine-beer-other brandies) broken down between home-produced and imported (model A); (2) alcoholic beverages only without disaggregation between home-produced and imported (model B), and (3) aggregate alcoholic beverages (wine-beer-other brandies) and food (model C). Zellner's iterative estimation procedure was used for estimating the model. The empirical findings: (1) strongly support the dynamic version of the AIDS over its static alternative; and (2) provide certain guidelines concerning economic policies relating to an increase in government revenues and changing the composition between home-produced and imported consumption of alcoholic beverages. These basic findings could be considered relevant to the policy makers in the light of Cyprus' accession to the EU.     

Traffic accidents,deaths and alcohol consumption

The main goal of this article is to analyse the relationship existing among prices of alcoholic beverages, alcohol consumption and traffic fatalities for the Spanish Autonomous Communities during the time interval 1998 to 2002. Among the main results, we highlight a positive correlation between alcohol consumption and traffic mortality rate. Basically, governments implement two kinds of policies to reduce the traffic mortality rate. One is oriented to control the supply of alcohol by increasing alcohol taxes. The other is oriented to preserve traffic security, increasing the number of sanctions for traffic rule infraction. We find evidence that both policies exert a positive influence in the reduction of traffic fatalities. There is no empirical evidence to indicate that being a novice driver increases the tendency to be involved in a mortal traffic accident.     

BINGE DRINKING IN COLLEGE: THE IMPACT OF PRICE, AVAILABILITY, AND ALCOHOL CONTROL POLICIES

This paper estimates the effects of beer prices, alcohol availability, and policies related to driving under the influence of alcohol on drinking and binge drinking among youths and young adults. Data are from a nationally representative survey of students in U.S. colleges and universities. Separate estimates are obtained for underage male and female students, as well as for older male and female students. The estimates indicate that the drinking practices of male college students are generally insensitive to the price of beer. However, underage drinking and binge drinking by female students do respond significantly to price, although both are relatively inelastic. The results also show that strong drunk driving policies targeting youths and young adults significantly reduce drinking and binge drinking by male students. Similarly, these policies reduce drinking among female college students but appear to have little impact on their binge drinking. Instead, the results indicate that many elements of campus life (including participation in a fraternity or sorority, living on campus, and the ready availability of alcoholic beverages) are among the most important determinants of drinking and binge drinking among college students.     

Advertising and US alcoholic beverage demand: system-wide estimates

The effects of advertising on consumption of alcoholic beverages in the US are analysed. The goal is to obtain evidence on the importance of advertising at the level of beverage demand(beer, wine, spirits) and for total consumption of alcohol (per capita gallons of ethanol). A three-equation conditional demand system is estimated that includes own- and cros-beverage advertising as explanatory variables. Four models of the differential demand system are estimated, including the Rotterdam, AID, CBS, and NBR models, using annual US data for the period 1964-90 on beverage consumption, prices, expednitures, and real advertising. Estimates are obtained of the complete matrix of own- and cross-elascities for each beverage’ price and advertising. At the beverage level, the results indicate a positive butr very small effect of advertising on beverage consumption, with most of the impact due to wine advertising and non due to beer advertising. There is no efect of advertising in the composite demand function for alcohol. Hence, the results from system-wide modelling suggest that alcohol advertising serves to reallocate brand sales, with no effect on total ethanol consumption and very small effects on beverage consumption.     

Cross-country alcohol consumption comparison: an application of the Rotterdam demand system

This paper analyses the consumption patterns of the three beverages beer, wine and spirits in nine countries, Australia, Canada, Finland, Japan, New Zealand, Norway, Sweden, the UK and the US, using the Rotterdam demand system. A cross-country comparison of the results shows that in most countries (i)wine consumption has grown at a fasteer rate than beer and spirits; (ii) the proportion of consumers' expenditure on alcohol is declining; (iii)beer is a necessity and spirits is a luxury; (iv)the demand for the three beverages is price inelastic; and (iv)all three beverages are pair-wise substitutes. We also investigated the hypothesis of identical parameters for all countries by pooling the data across countries and found that the data do not support the hypothesis.     

An almost ideal demand system for alcoholic beverages in British Columbia

An almost ideal demand system for alcoholic beverages in British Columbia is estimated based on five beverage categories. Estimates of the model unrestricted and restricted to satisfy homogeneity and symmetry are presented. The restrictions are tested: as is common in applied demand analysis a number of rejections are encountered, although within-equation tests tend to support homogeneity. The rejections which are encountered are not mitigated by the inclusion of dynamic elements. The Slutsky matrix is used to examine the concavity of the expenditure function, which is found to be mildly violated. Marshallian and Hicksian own-, cross-price, and income elasticities are calculated and are found to be largely consistent with previous findings, although some noteworthy results are obtained.     

The complex attitudes to alcohol taxation

Alcoholic beverages are taxed at very different rates across the EU, which implies extensive cross-border shopping. Therefore, there is an ongoing debate about harmonization of alcohol taxes among countries. Sweden, with a tradition of high alcohol taxes due to public health arguments, has the highest excise duties on spirits in the EU. But, because of this, the occurrence and possible problems caused by cross-border shopping are also extensive. Using a questionnaire survey I analyse the Swedes’ attitudes to alcohol taxation and find that these two sides of the coin are important determinants. Many respondents want to decrease the alcohol tax, while some even want to increase it. Those most positive to alcohol taxation are those who regard increased alcohol consumption as a worrying problem and those living in areas where many adults are treated for alcohol-related diseases. However, the ordered-probit analysis also shows that those who support the EU membership are more supportive of reduced taxation to harmonize the Swedish tax with those in other EU countries. Those who live in regions where privately imported alcohol is substantial are also more reluctant to alcohol taxation.     

Autocorrelation,structural breaks and the predictive ability of dividend yield

Wine consumption is modelled by focusing on three decisions. The first is whether to consume any alcoholic beverages. Setting aside the teetotalers, the second decision is whether to consume wine and the third choice is how much to consume. We model these decisions using a double-hurdle approach. Our econometric results indicate that the probability a man drinks wine increases if he is under age 65, has a high income and is a high school graduate. Heavy wine consumers are over age 65, are well educated, physically active, and have high incomes.     

Economic determinants of the consumption of alcoholic beverages in Canada: a panel data analysis

In this article, the economic determinants of the demand for three alcoholic beverages (wine, spirits, and beer) are investigated with a focus on the price, income and unemployment effects. The investigation is conducted within the fixed effects panel regression framework using a balanced panel for ten Canadian provinces spanning the years 1981–2004. The estimated own price elasticities indicate that increased government taxation is an effective tool for curtailing the consumption of spirits (at the expense of lower government tax revenue), but it is less effective for curtailing the consumption of wine or beer. The cross-price elasticity estimates reveal that taxing beer or spirits may not be an effective tool for encouraging consumption switch from these alcoholic beverages to wine in light of wine’s greater health benefits. Income emerges as an important determinant of the consumption of both wine and spirits but not of beer, whereas unemployment emerges as an important determinant of the consumption of beer but not of wine or spirits. With respect to unemployment, we find no support for the addiction hypothesis in the case of wine and spirits and strong support for the severe budget constraint hypothesis in the case of beer.     

SOCIAL COMPARISON AND SUBJECTIVE WELL‐BEING: DOES THE HEALTH OF OTHERS MATTER?

The importance of social comparison in shaping individual utility has been widely documented by subjective well‐being literature. So far, income and unemployment have been the main dimensions considered in social comparison. This paper aims to investigate whether subjective well‐being is influenced by inter‐personal comparison with respect to health. Thus, we study the effects of the health of others and relative health hypotheses on two measures of subjective well‐being: happiness and subjective health. Using data from the Italian Health Conditions survey, we show that a high incidence of chronic conditions and disability among reference groups negatively affects both happiness and subjective health. Such effects are stronger among people in the same condition. These results, robust to different econometric specifications and estimation techniques, suggest the presence of some sympathy in individual preferences with respect to health and reveal that other people's health status serves as a benchmark to assess one's own health condition.     

Alcohol demand among young people in Spain: an addictive QUAIDS

This paper analyzes the demand for alcoholic beverages among young people in Spain. To that end, we develop a theoretical model which combines elements from the Theory of Two-Stage Budgeting and the Theory of Addiction, with this being empirically translated into a Quadratic Almost Ideal Demand System (QUAIDS) in which the particular characteristics of young people are introduced by Price Scaling (PS) techniques. We then estimate this specification by using data drawn from the Spanish National Survey on Drug Use in the School Population (2000) and the Spanish National Household Survey (2000). Given that wine, beer and spirits all have normal demands, our results suggest that a tax increase imposed with the intention of reducing alcohol consumption would appear to be efficient. This paper was partially written while Ana Isabel Gil was a Visiting Researcher at the London School of Economics and Political Science, to which she would like to express her gratitude for the hospitality and facilities provided. An earlier version of this paper has been presented at the Spanish Economic Analysis Meeting-2003 (Sevilla, Spain) with all the comments made by the participants being appreciated. Finally, the authors would like to express their thanks for the financial support provided by the Spanish Ministry of Education-CICYT and the European Commission (Project 2FD97-2057). The usual disclaimer applies.     

An empirical note about additive outliers and nonstationarity in Latin-American inflation series

This note shows the empirical dangers of the presence of large additive outliers when testing for unit roots using standard unit root statistics. Using recent proposed procedures applied to four Latin-American inflation series, I show that the unit root hypothesis cannot be rejected.Jel classification: C2, C3, C5I want to thank Pierre Perron for useful comments on a preliminary version of this paper. Helpful comments from an anonymous referee, and Yiagadeesen Samy are appreciated. I thank the Editor Baldev Raj for useful comments about the final structure of this paper. Finally, I also thank André Lucas for helpful suggestions concerning the use of his nice computer program Robust Inference Plus Estimation (RIPE).First revision received: August 2001/Final revision received: December 2002