Friday, 7 August 2009

Further on the price elasticity of demand for alcohol

The Law Commission's report claims that youth are particularly price sensitive and that heavy drinkers are no less price sensitive than moderate drinkers. As noted a couple of days ago, the latter claim is absolute nonsense. Price elasticity of demand among heavy drinkers about roughly half of that of the average. However, that average includes heavy drinkers, so it probably understates the true difference between moderate and heavy drinkers.

What though of the claims of heightened youth price elasticity? It's plausible: alcohol is also income elastic, and youth are poorer, so what you could find a higher elasticity working through that mechanism. LC cites a book by Babor which isn't available in the Canterbury library. I'll put it on interloan request, but in the meantime have gone searching for any numbers on the elasticity of youth consumption. Google Scholar has only thus far provided one estimate. Grossman, Chaloupka, et al, 1998, Economic Inquiry. They find that youth short term price elasticity of demand for alcohol is -0.41. Identical to the average found in the meta-study cited in the previous post.

Given how the LC utterly misread the literature on relative elasticities of heavy and moderate drinkers, I'm not inclined to give them the benefit of the doubt while waiting for the book on interloan. We will see what shows up in the interloans pile in a week or two.

No comments:

Post a Comment