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How elastic is alcohol consumption?

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  • Clements, Kenneth W.
  • Mariano, Marc Jim M.
  • Verikios, George
  • Wong, Berwyn

Abstract

Strange as it may seem, Treasury, brewers, winemakers, distillers and drinkers all share a common interest: The taxation of alcohol and its price elasticity of demand. Treasury needs this information to determine revenue, the industry for pricing purposes, and drinkers bear the burden of taxation. This paper presents new estimates of demand elasticities of beer, wine and spirits for Australia. The estimates are considerably lower than those of Srivastava et al. (2014), who used monthly, off-premise consumption. Frequency of purchase and location of drinking are most likely the source of the differences. The paper demonstrates the importance of demand elasticities with simulations of changes in the tax mix for alcoholic beverages with partial and general equilibrium approaches.

Suggested Citation

  • Clements, Kenneth W. & Mariano, Marc Jim M. & Verikios, George & Wong, Berwyn, 2022. "How elastic is alcohol consumption?," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 568-581.
    • Handle: RePEc:eee:ecanpo:v:76:y:2022:i:c:p:568-581
    DOI: 10.1016/j.eap.2022.09.003
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