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Price Elasticity of Alcohol Demand in India

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  • Santosh Kumar

    (Department of Economics and International Business, Sam Houston State University)

Abstract

Using a household survey conducted in 2014, this study estimates price elasticity of demand for beer, country liquor, and spirits in India. Ordinary least square models were used to estimate the responsiveness in alcohol demand due to price change. We include a large number of control variables to adjust for potential confounding in the model. Inter-district variation in alcohol consumption is adjusted for by including district fixed-effects. Alcohol prices are negatively associated with demand for alcoholic beverages. The price elasticity of demand ranged from -0.14 for spirits to -0.46 for country liquor. Low level of education was positively associated with spirits consumption. The magnitude of elasticity varied by rural-urban, education, and gender. Results indicate a policy mix of price controls and awareness campaigns would be most effective in tackling the adverse effects of harmful drinking in India

Suggested Citation

  • Santosh Kumar, 2016. "Price Elasticity of Alcohol Demand in India," Working Papers 1610, Sam Houston State University, Department of Economics and International Business.
    • Handle: RePEc:shs:wpaper:1610
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    File URL: http://www.shsu.edu/academics/economics-and-international-business/documents/wp_series/wp16-10_paper.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Padmaja Ayyagari & Partha Deb & Jason Fletcher & William Gallo & Jody L. Sindelar, 2013. "Understanding Heterogeneity In Price Elasticities In The Demand For Alcohol For Older Individuals," Health Economics, John Wiley & Sons, Ltd., vol. 22(1), pages 89-105, January.
    3. 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.
    4. Yevgeniy Goryakin & Bayard Roberts & Martin McKee, 2015. "Price elasticities of alcohol demand: evidence from Russia," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(2), pages 185-199, March.
    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.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Jolad, Shivakumar & Ravi, Chaitanya, 2021. "Addressing the dilemma of India’s state dependency on Alcohol: ‘New-Soft’ Paternalism approach," SocArXiv 7pnh5, Center for Open Science.
    2. Toan Ngoc Nguyen, 2020. "The Determinants of an Econometric Demand Model for Beverages," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 383-394.
    3. Kaushalendra Kumar & Santosh Kumar & Anil Kumar Singh, 2018. "Prevalence and socio-demographic correlates of alcohol consumption: survey findings from five states in India," Working Papers 1802, Sam Houston State University, Department of Economics and International Business.

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    More about this item

    Keywords

    Price elasticity of demand; Alcohol demand; Public policy; India;
    All these keywords.

    JEL classification:

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

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