U.S. consumer demand for alcoholic beverages: cross-section estimation of demographic and economic effects

• Published in: Applied economic perspectives and policy 1996-09, Vol.18 (3), p.477-489
• Main Authors: Wang, Jirong, Gao, X.M., Wailes, Eric J., Cramer, Gail L.
• Format: Article
• Language: English
• Subjects: Alcohol drinking; ALCOHOLIC BEVERAGES; BEBIDAS ALCOHOLICAS; Beer industry; BOISSON ALCOOLISEE; COMPORTAMIENTO DEL CONSUMIDOR; COMPORTEMENT DU CONSOMMATEUR; CONSOMMATION ALIMENTAIRE; CONSUMER BEHAVIOUR; Consumer economics; CONSUMER EXPENDITURE; CONSUMO DE ALIMENTOS; CONSUMPTION PATTERNS; DECISION MAKING; Demand; DEMOGRAFIA; DEMOGRAPHIE; DEMOGRAPHY; DEPENSE DES CONSOMMATEURS; DOUBLE-HURDLE MODEL; ECONOMETRIC MODELS; Economic models; ELASTICIDAD DE LOS PRECIOS; ELASTICITE DES PRIX; Elasticity of demand; ENCUESTAS; ENQUETE; Estimated taxes; ETATS UNIS; EUA; FOOD CONSUMPTION; GASTOS DE CONSUMO; HOGARES; HOUSEHOLDS; MEAL PATTERNS; MENAGE; MODELE ECONOMETRIQUE; MODELOS ECONOMETRICOS; PAUTAS ALIMENTARIAS; PERFECT PRICE AGGREGATION; PRICE ELASTICITIES; Price elasticity; PRISE DE DECISION; SCHEMA ALIMENTAIRE; SURVEYS; SYNTHETIC DEMAND MODEL; TOMA DE DECISIONES; USA
• ISSN: 1058-7195; 2040-5790; 1467-9353; 2040-5804
• DOI: 10.2307/1349630

Consumption of alcoholic beverages has been historically viewed not only in terms of its effect on individuals' utility maximization, but also in terms of its bearing on social concerns and government revenue. The estimation of demand elasticities and the effects of household characteristic variables on alcohol demand provide important information for the formulation of public policies. This article discusses the specification and estimation of a two-stage consumer demand for alcoholic beverages using the most recent United States Department of Agriculture household food consumption survey data. The upper-level first-stage budgeting decision is estimated using a double-hurdle model, where consumer decisions on whether to consume alcoholic beverages and how much to consume are defined separately. The lower-level second-stage budgeting decision allocates alcohol expenditure via a conditional synthetic demand system for beer, spirits, and wine. For the second stage, a level version synthetic system is constructed using a normalized linear combination of level Rotterdam, a Central Bureau of Statistics model, and an Almost Ideal Demand System equivalent model. The prices, calculated by dividing value by quantities, are quality adjusted, and selection biases are corrected. Results show that some household characteristic variables, as well as economic variables, have significant impacts on consumer demand for alcoholic beverages. Results of the two-stage budgeting model indicate that as a revenue generator, increasing excise taxes on alcoholic beverages is feasible. But, they are not necessarily reliable sources of revenue