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Alcohol quantity and quality price elasticities: quantile regression estimates

Author

Listed:
  • Robert Pryce

    () (University of Sheffield)

  • Bruce Hollingsworth

    (Lancaster University)

  • Ian Walker

    (Lancaster University)

Abstract

Abstract Many people drink more than the recommended level of alcohol, with some drinking substantially more. There is evidence that suggests that this leads to large health and social costs, and price is often proposed as a tool for reducing consumption. This paper uses quantile regression methods to estimate the differential price (and income) elasticities across the drinking distribution. This is also done for on-premise (pubs, bars and clubs) and off-premise (supermarkets and shops) alcohol separately. In addition, we examine the extent to which drinkers respond to price changes by varying the ‘quality’ of the alcohol that they consume. We find that heavy drinkers are much less responsive to price in terms of quantity, but that they are more likely to substitute with cheaper products when the price of alcohol increases. The implication is that price-based policies may have little effect in reducing consumption amongst the heaviest drinkers, provided they can switch to lower quality alternatives.

Suggested Citation

  • Robert Pryce & Bruce Hollingsworth & Ian Walker, 2019. "Alcohol quantity and quality price elasticities: quantile regression estimates," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(3), pages 439-454, April.
    • Handle: RePEc:spr:eujhec:v:20:y:2019:i:3:d:10.1007_s10198-018-1009-8
    DOI: 10.1007/s10198-018-1009-8
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    References listed on IDEAS

    as
    1. Anne Ludbrook, 2009. "Minimum pricing of alcohol," Health Economics, John Wiley & Sons, Ltd., vol. 18(12), pages 1357-1360.
    2. Deaton, Angus, 1988. "Quality, Quantity, and Spatial Variation of Price," American Economic Review, American Economic Association, vol. 78(3), pages 418-430, June.
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    4. Gallet, Craig A., 2007. "The demand for alcohol: a meta-analysis of elasticities," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(2), pages 1-15.
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    6. Sergio Firpo & Nicole M. Fortin & Thomas Lemieux, 2009. "Unconditional Quantile Regressions," Econometrica, Econometric Society, vol. 77(3), pages 953-973, May.
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    Cited by:

    1. Tanja Laković & Ana Mugoša & Mirjana Čizmović & Gordana Radojević, 2019. "Impact of Taxation Policy on Household Spirit Consumption and Public-Finance Sustainability," Sustainability, MDPI, Open Access Journal, vol. 11(20), pages 1-15, October.

    More about this item

    Keywords

    Alcohol demand; Quantile regression; Quality elasticity;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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