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Income and price elasticities of demand for alcoholic drinks

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  • M. A. Salisu
  • V. N. Balasubramanyam

Abstract

This paper provides estimates of income and price elasticities of demand for beer, wine and spirits in the UK and utilizes these elasticities to estimate the impact of the increase in tax rates, announced by the Chancellor in his revised November 1994 budget, on total tax revenues. The estimates of additional tax revenues based on our model are lower than those expected by the Chancellor. The results reported in this paper suggest that if the Chancellor were to realize the revenues he expects from taxation of alcoholic drinks he would have to increase the tax rates on wine and lower those on beer and spirits.

Suggested Citation

  • M. A. Salisu & V. N. Balasubramanyam, 1997. "Income and price elasticities of demand for alcoholic drinks," Applied Economics Letters, Taylor & Francis Journals, vol. 4(4), pages 247-251.
    • Handle: RePEc:taf:apeclt:v:4:y:1997:i:4:p:247-251
    DOI: 10.1080/758518504
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    References listed on IDEAS

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    1. Wojciech W. Charemza & Derek F. Deadman, 1992. "New Directions In Econometric Practice," Books, Edward Elgar Publishing, number 84.
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    Cited by:

    1. Angulo, Ana Maria & Gil, Jose Maria & Gracia, Azucena, 2001. "The demand for alcoholic beverages in Spain," Agricultural Economics, Blackwell, vol. 26(1), pages 71-83, October.
    2. Craig Gallet, 1999. "Gradual switching regression estimates of alcohol demand elasticities," Applied Economics Letters, Taylor & Francis Journals, vol. 6(6), pages 377-379.
    3. Jeffrey D. Kubik & John R. Moran, 2001. "Can Policy Changes Be Treated as Natural Experiments? Evidence from State Excise Taxes," Center for Policy Research Working Papers 39, Center for Policy Research, Maxwell School, Syracuse University.
    4. Geraint Johnes, 2000. "Up Around the Bend: Linear and nonlinear models of the UK economy compared," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(4), pages 485-493.
    5. James Fogarty, 2010. "The Demand For Beer, Wine And Spirits: A Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 24(3), pages 428-478, July.
    6. Liam Lenten & Imad Moosa, 1999. "Modelling the trend and seasonality in the consumption of alcoholic beverages in the United Kingdom," Applied Economics, Taylor & Francis Journals, vol. 31(7), pages 795-804.

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