DETERMINANTS OF ALCOHOL CONSUMPTION: A CROSS-COUNTRY ANALYSIS

Abstract

This paper aims to study the important determinants of alcohol consumption across country. Using the data of 180 countries for the year 2012, we estimate the demand functions of two types of alcohol: beer and wine. Both linear and log-linear specifications are used to estimate regression models for male, female, and both sexes. We find that like any standard demand function, the world demand for each category of alcohol depends on its own price, income, prices of related goods, and other socio-economic factors. We see that irrespective of categories and sexes, worldwide alcohol consumption is both price and income inelastic. However, other factors such as advertising restriction, ban on alcohol consumption, alcohol abstainers, and religion can play important role in determining alcohol consumption across countries. For example, we see that per capita consumption of beer is lower for countries having advertising restriction on beer sales. Per capita consumption of beer tends to be lower in Muslim majority countries. Per capita consumption of beer tends to be lower where there is ban on alcohol consumption. There is a strong inverse relation between per capita consumption of beer and price of wine, ceteris paribus. On the other hand, per capita wine consumption is higher in Christian populated countries. Human capital plays a significant role in per capita wine consumption; the research shows that there is a positive relation between the two. Moreover, policies such as license required for retail sales of wine and excise tax of wine are significant such that where these policies are applied; per capita wine consumption has decreased. Also there is a negative relation between per capita alcohol consumption and alcohol abstainer for both types of alcohols.