A few drinks behind—Alcohol price and income elasticities in Europe: A microeconometric note

Abstract

We provide new cross‐country evidence on alcohol price and income elasticities based on microdata on individual behaviour. Our approach is original as previous research mainly estimates determinants of consumption with macroeconomic data. We use the latest available wave of the European Social Survey, 2014, merged with the Annual Database of National Beverage Consumption. We estimate a generalised Heckman model on the individual and national determinants of alcohol consumption with standard errors bootstrapped at the country level. We were able to identify direct and indirect effects of price and income, including their specific impacts on drinkers and abstainers.

Following Pauline advice? A short note on moderate alcohol consumption and subjective well‐being in Europe

“…This leads to a scale (which has been standardized) with a high internal consistency (Cronbach's α = 0.82). We control for potential endogeneity between life satisfaction and drinking based on the model developed in Rousselière et al (2022). Following previous research such as Tomkins et al (2019), abstinence is therefore instrumented using standard instrumental variable such as religion.…”

“…This system of equations is estimated using simulated maximum likelihood thanks to the conditional mixed process (CMP) algorithm (Roodman, 2011). Standard errors are computed using a country‐specific bootstrap approach, with 200 replications, to preserve the cluster dimension of the data and to correct standard errors that might therefore be biased (Field & Welsh, 2007; Rousselière et al, 2022). As a robustness check, we estimate an alternative “plug in” method (namely 2SRI—two stage residual inclusion) developed by Terza et al (2008).…”

“…Building on a previous paper (Rousselière et al, 2022) on the determinants of alcohol consumption in Europe, we provide new cross-country evidence on the relation between alcohol consumption and subjective well-being (SWB). Using the latest available wave on health of the European Social Survey (2014), merged with the Annual Database of National Beverage Consumption, we contribute to the sparse literature on the well-being impacts of alcohol policies.…”

Why do drinkers earn more? Job characteristics as a possible link

“…The exception is Rousselière et al. (2022), who use individual‐level data on 21 European countries (the European Social Survey for 2014); they find positive but small (lower than 0.2) elasticities of the probability to drink beer, wine or spirits and small (beer), zero (wine) or negative (spirits) elasticities of volume conditional on consuming. Of course, identification of the income effect relies on 21 data points only and is subject to omitted variable bias (variation across countries can be due to other things that vary like GDP per capita).…”