The demand for distilled spirits: an empirical investigation

Economic and social factors that explain variations in the consumption of distilled spirits among political jurisdictions are examined. Particular emphasis is placed on the economic roles of price and the unemployment rate. Using multivariate-analysis regression, equations are estimated for three separate time periods of 1970-1975. In addition, a pooled cross-sectional time-series analysis is undertaken for the entire time period. The dependent variable is the apparent per capita consumption of distilled spirits. The independent variables include price, availability and socioeconomic factors that determine consumption patterns. The results indicate that the price elasticity of demand for distilled spirits inelastic, and implies that a 1% change in price will result in a less than 1% change in the amount purchased, everything else being equal. A rise in price will increase total revenue. Thus, a tax increase on the commodity will generate an increase in tax revenue. The unemployment rate is shown to have a significant impact on the consumption of distilled spirits. The results suggest that further study into the relationship between unemployment and the consumption of distilled spirits is desirable.