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Estimation of own and cross price elasticities of alcohol demand in the UK—A pseudo-panel approach using the Living Costs and Food Survey 2001–2009

Author

Listed:
  • Meng, Yang
  • Brennan, Alan
  • Purshouse, Robin
  • Hill-McManus, Daniel
  • Angus, Colin
  • Holmes, John
  • Meier, Petra Sylvia

Abstract

The estimation of price elasticities of alcohol demand is valuable for the appraisal of price-based policy interventions such as minimum unit pricing and taxation. This study applies a pseudo-panel approach to the cross-sectional Living Cost and Food Survey 2001/2–2009 to estimate the own- and cross-price elasticities of off- and on-trade beer, cider, wine, spirits and ready-to-drinks in the UK. A pseudo-panel with 72 subgroups defined by birth year, gender and socioeconomic status is constructed. Estimated own-price elasticities from the base case fixed effect models are all negative and mostly statically significant (p<0.05). Off-trade cider and beer are most elastic (−1.27 and −0.98) and off-trade spirits and on-trade ready-to-drinks are least elastic (−0.08 and −0.19). Estimated cross-price elasticities are smaller in magnitude with a mix of positive and negative signs. The results appear plausible and robust and could be used for appraising the estimated impact of price-based interventions in the UK.

Suggested Citation

  • Meng, Yang & Brennan, Alan & Purshouse, Robin & Hill-McManus, Daniel & Angus, Colin & Holmes, John & Meier, Petra Sylvia, 2014. "Estimation of own and cross price elasticities of alcohol demand in the UK—A pseudo-panel approach using the Living Costs and Food Survey 2001–2009," Journal of Health Economics, Elsevier, vol. 34(C), pages 96-103.
    • Handle: RePEc:eee:jhecon:v:34:y:2014:i:c:p:96-103
    DOI: 10.1016/j.jhealeco.2013.12.006
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    References listed on IDEAS

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    1. Verbeek, Marno & Vella, Francis, 2005. "Estimating dynamic models from repeated cross-sections," Journal of Econometrics, Elsevier, vol. 127(1), pages 83-102, July.
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    Keywords

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    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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