Peer effects and the rise of beer in Russia

Between 1996 and 2007, per capita beer consumption in Russia more than quintupled, making beer the most important alcoholic drink in Russia today and transforming Russia into the world’s third largest beer market. We study the role of peer effects in this rapid adoption of beer. In particular, we argue that the initial ‘shocks’ of improvements in quality and increased advertising were magnified through peer effects. Using detailed data from the Russian Longitudinal Monitoring Survey, we analyze the individual choice to drink beer, controlling for a wide range of potential factors. Our results indicate that peer effects played an important role as a ‘transmission mechanism’ in persuading consumers to start drinking beer. In contrast, changes in prices and incomes seem to have played only a minor role.