Elsevier

Journal of Health Economics

Volume 34, March 2014, Pages 96-103
Journal of Health Economics

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

https://doi.org/10.1016/j.jhealeco.2013.12.006Get rights and content
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open access

Highlights

  • A pseudo-panel approach is used to estimate own- and cross-price elasticities of off- and on-trade alcoholic beverages.

  • Estimated own-price elasticities are all negative, with off-trade cider and beer being most elastic and off-trade spirits and on-trade ready-to-drinks least elastic.

  • Estimated cross-price elasticities are smaller in magnitude with a mix of positive and negative signs.

  • The results could be used for appraising the estimated impact of price-based interventions such as minimum unit pricing and taxation in the UK.

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.

JEL classification

C10
C21
C23
I12
I18

Keywords

Alcohol demand
Elasticities
Cross price elasticities
Pseudo-panel

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