Journal of Wine Economics

Table of Contents - 2011 - Volume 6, Issue 02  

Symposium “Beeronomics: The Economics of Beer and Brewing”

Beer in Good Times and Bad: A U.S. State-Level Analysis of Economic Conditions and Alcohol Consumption*

Donald G. Freemana1

a1 Department of Economics & International Business, Sam Houston State University, P.O. Box 2118, Huntsville, Texas 77341–2118. e-mail: freeman@shsu.edu

Abstract

Data on U.S. state-level beer shipments from 1970 to 2007 provided by The Beer Institute are used to estimate pooled time-series models of annual consumption regressed on economic and demographic variables, using the common correlated effects (CCE) estimators to control for unobserved common effects and to allow for heterogeneous responses across units. Beer is found to be a procyclical good, varying negatively with the state unemployment rate. Previous findings for the negative effect of excise taxes on consumption are supported, though the estimated elasticities are smaller than those reported in earlier research. Demographics have a significant and material effect on consumption, with larger shares of young adults in the population implying greater consumption of beer per capita. (JEL Classification: D12, C23)

Footnotes

* Paper originally presented to the first Beeronomics Conference, Leuven, Belgium, May 2009. The author thanks the participants of the conference and the referees for useful comments and constructive suggestions, and the special editors Jo Swinnen, Thijs Vandemoortele, and Stijn Vanormelingen for their support.