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Demand for Wine in Australia: Systems Versus Single Equation Approach

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  • Chang, Hui-Shung (Christie)
  • Bettington, Nicholas
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    Abstract

    The objective of the study is to estimate demand for wine in Australia, based on both the systems approach and the single equation approach. Both approaches consider demand for three categories of alcoholic drinks (beer, wine and spirits) in a seemingly unrelated regression framework to take account of cross-equation correlations. Time series data on retail price indexes and apparent per capita consumption of alcoholic beverages for Australia for the period 1975/76 to 1998/99 are used for econometric estimation. The results show that over the short run, beer and wine are necessities; however, over the long run, wine becomes a luxury good. Beer and wine are complements. Demand for all three beverages is price inelastic. The study also found that the behaviour of wine consumers reflect past consumption patterns, indicating that wine is more addictive than either beer or spirits. A structural change in consumer preferences away from cheaper cask wines to more expensive bottled table wines has a significant impact on the volume of wine consumption. Finally, wine consumption has increased over time. The study re-confirms the importance of developing a model that considers the impacts of both economic and non-economic variables on wine consumption.

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    Bibliographic Info

    Paper provided by University of New England, School of Economics in its series Working Papers with number 12923.

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    Date of creation: 2001
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    Handle: RePEc:ags:uneewp:12923

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    Related research

    Keywords: wine demand; demand analysis; almst ideal demand system; Demand and Price Analysis;

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    1. repec:ubc:bricol:92-12 is not listed on IDEAS
    2. David Blake & Angelika Nied, 1997. "The demand for alcohol in the United Kingdom," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1655-1672.
    3. Oczkowski, Edward A., 1993. "A Hedonic Price Function for Australian Premium Table Wine," 1993 Conference (37th), February 9-11, 1993, Sydney, Australia 147769, Australian Agricultural and Resource Economics Society.
    4. Clements, Kenneth W & Selvanathan, Antony & Selvanathan, Saroja, 1996. "Applied Demand Analysis: A Survey," The Economic Record, The Economic Society of Australia, vol. 72(216), pages 63-81, March.
    5. Clements, Kenneth W & Johnson, Lester W, 1983. "The Demand for Beer, Wine, and Spirits: A Systemwide Analysis," The Journal of Business, University of Chicago Press, vol. 56(3), pages 273-304, July.
    6. Adolf Buse, 1998. "Testing Homogeneity in the Linearized Almost Ideal Demand System," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 208-220.
    7. Andreas Andrikopoulos & James Brox & Emanuel Carvalho, 1997. "The demand for domestic and imported alcoholic beverages in Ontario, Canada: a dynamic simultaneous equation approach," Applied Economics, Taylor & Francis Journals, vol. 29(7), pages 945-953.
    8. Marcus Chambers & K. Ben Nowman, 1997. "Forecasting with the almost ideal demand system: evidence from some alternative dynamic specifications," Applied Economics, Taylor & Francis Journals, vol. 29(7), pages 935-943.
    9. Attfield, Clifford L. F., 1985. "Homogeneity and endogeneity in systems of demand equations," Journal of Econometrics, Elsevier, vol. 27(2), pages 197-209, February.
    10. Jones, Andrew M, 1989. "A Systems Approach to the Demand for Alcohol and Tobacco," Bulletin of Economic Research, Wiley Blackwell, vol. 41(2), pages 85-105, April.
    11. John Freebairn & Bill Griffiths, 2006. "Introduction," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages S1-S1, 09.
    12. Lariviere, Eric & Larue, Bruno & Chalfant, Jim, 2000. "Modeling the demand for alcoholic beverages and advertising specifications," Agricultural Economics, Blackwell, vol. 22(2), pages 147-162, March.
    13. Lariviere, Eric & Larue, Bruno & Chalfant, Jim, 2000. "Modeling the demand for alcoholic beverages and advertising specifications," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 22(2), March.
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    Cited by:
    1. Sean Lyons & Karen Mayor & Richard S.J. Tol, 2007. "Convergence Of Consumption Patterns During Macroeconomic Transition: A Model Of Demand In Ireland And The Oecd," Working Papers FNU-141, Research unit Sustainability and Global Change, Hamburg University, revised Aug 2007.

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