The impact of prices on alcoholic beverage consumption in Chile

Chile is among the countries with the highest alcohol consumption per capita in Latin America, but little has been done in the way of public policy and policy research to overcome this problem. The objective of the present study is to estimate demand elasticities (own-price, cross-price, expenditure...

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Published in:PloS one 2018-10, Vol.13 (10), p.e0205932-e0205932
Main Authors: Araya, Daniel, Paraje, Guillermo
Format: Article
Language:English
Subjects:
Acquired immune deficiency syndrome
Adolescent
AIDS
Alcohol Drinking - economics
Alcohol use
Alcoholic beverages
Alcoholic Beverages - economics
Analysis
Beverage industry
Beverages
Biology and Life Sciences
Budgets
Chile
Commerce - economics
Consumer research
Demand
Dispersion
Economic aspects
Economic models
Elasticity
Elasticity of demand
Female
Humans
Male
Medicine and Health Sciences
Middle Aged
People and places
Policy research
Price elasticity
Prices and rates
Public policy
Research and Analysis Methods
Sensitivity
Social aspects
Social Sciences
Spirits
Supply and demand
Surveys
Systematic review
Wine
Wines
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Paraje, Guillermo
description Chile is among the countries with the highest alcohol consumption per capita in Latin America, but little has been done in the way of public policy and policy research to overcome this problem. The objective of the present study is to estimate demand elasticities (own-price, cross-price, expenditure and quality) for three groups of alcoholic beverages in Chile: spirits, wines, and beers. The study uses data from the VII Encuesta de Presupuestos Familiares (Family Budget Survey) 2011-2012 conducted by the National Institute of Statistics. Because of problems with the quality of the measurement units, hot-deck imputation method was used with the alcohol purchases that presented problems. To estimate the demand elasticities, the Almost Ideal Demand System (AIDS) method proposed by Deaton was used. Quality decisions were estimated for each beverage separately using an equation proposed by Deaton in the three-step AIDS. The estimated elasticities were more inelastic for spirits (-0.14, P
doi_str_mv 10.1371/journal.pone.0205932
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The objective of the present study is to estimate demand elasticities (own-price, cross-price, expenditure and quality) for three groups of alcoholic beverages in Chile: spirits, wines, and beers. The study uses data from the VII Encuesta de Presupuestos Familiares (Family Budget Survey) 2011-2012 conducted by the National Institute of Statistics. Because of problems with the quality of the measurement units, hot-deck imputation method was used with the alcohol purchases that presented problems. To estimate the demand elasticities, the Almost Ideal Demand System (AIDS) method proposed by Deaton was used. Quality decisions were estimated for each beverage separately using an equation proposed by Deaton in the three-step AIDS. The estimated elasticities were more inelastic for spirits (-0.14, P&lt;0.01), followed by wines (-0.77, P&lt;0.01) and beers (-0.93, P&lt;0.01). 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The objective of the present study is to estimate demand elasticities (own-price, cross-price, expenditure and quality) for three groups of alcoholic beverages in Chile: spirits, wines, and beers. The study uses data from the VII Encuesta de Presupuestos Familiares (Family Budget Survey) 2011-2012 conducted by the National Institute of Statistics. Because of problems with the quality of the measurement units, hot-deck imputation method was used with the alcohol purchases that presented problems. To estimate the demand elasticities, the Almost Ideal Demand System (AIDS) method proposed by Deaton was used. Quality decisions were estimated for each beverage separately using an equation proposed by Deaton in the three-step AIDS. The estimated elasticities were more inelastic for spirits (-0.14, P&lt;0.01), followed by wines (-0.77, P&lt;0.01) and beers (-0.93, P&lt;0.01). Spirits reported less sensitivity to changes in the total budget, while wines reported the most sensitivity to changes in the total budget (expenditure elasticity). Wines also reported the most sensitivity related to quality for changes in the total budget (0,20, meaning that a 10% increase in a household's total expenditure increases the "quality" of purchased wines by 2%). Own-price elasticities reported for spirits, wines and beers are consistently negative, and inelastic, in line with international evidence. Although own-price elasticities for spirits is more inelastic than found in most studies, its quality-elasticity is more positive and greater. This could be explained by the greater price dispersion of spirits, as well as spirits (and wine) being consumed more than beers in Chile. This in turn may be because consumers have the option of switching to cheaper, Chilean-produced spirits such as pisco and wines when prices rise. The existence of these relatively broad quality-elasticities points to the need for a change in the alcohol tax structure from the current ad-valorem tax to a specific tax that could reduce price dispersion and curb total consumption.</abstract><cop>United States</cop><pub>Public Library of Science</pub><pmid>30346989</pmid><doi>10.1371/journal.pone.0205932</doi><tpages>e0205932</tpages><orcidid>https://orcid.org/0000-0002-3459-1422</orcidid><orcidid>https://orcid.org/0000-0002-7863-907X</orcidid><oa>free_for_read</oa></addata></record>
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subjects Acquired immune deficiency syndrome
Adolescent
AIDS
Alcohol Drinking - economics
Alcohol use
Alcoholic beverages
Alcoholic Beverages - economics
Analysis
Beverage industry
Beverages
Biology and Life Sciences
Budgets
Chile
Commerce - economics
Consumer research
Demand
Dispersion
Economic aspects
Economic models
Elasticity
Elasticity of demand
Female
Humans
Male
Medicine and Health Sciences
Middle Aged
People and places
Policy research
Price elasticity
Prices and rates
Public policy
Research and Analysis Methods
Sensitivity
Social aspects
Social Sciences
Spirits
Supply and demand
Surveys
Systematic review
Wine
Wines
title The impact of prices on alcoholic beverage consumption in Chile
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