The Demand for Alcoholic Beverages: Economic and Demographic Effects

Abstract

Recent proposals for revenue enhancement have called for increased taxation of alcoholic beverages. Knowledge of the structure of demand for an item is, of course, a primary ingredient in appraising any proposed tax plan. Although a number of studies have been conducted on data from other countries, very little is known about the demand for alcoholic beverages in the United States. This is particularly true for beverage specific studies. There has been no recent study treating the demand for alcoholic beverages in the U.S. as a complete system and most studies on specific beverages are also quite dated. Equally important has been the absence of demographic effects in the studies of demand for various alcoholic beverages. This paper attempts to remedy this shortcoming by providing estimates of the demand for beer, wine and spirits based on cross-section data.