Essays on the Demand for Alcohol in Sweden - Review and Applied Demand Studies

University dissertation from Department of Economics, Lund Universtiy

Abstract: The review and Paper I present applications of economics to the use of alcohol. The review considers the demand for alcohol. The first paper also considers taxes and other alcohol policy measures, social costs and economic evaluations. In Paper II, an Almost Ideal Demand System Model is used for the study of the demand for alcoholic beverages in Sweden during the years 1985-1995. The results indicate that the higher the alcohol content of a commodity is, the higher own price elasticity will be. The cross price elasticities show that when the price of one type of goods was increased, the consumption of goods with a lower content of alcohol increased. The estimated elasticities provide support for the overall conclusion that the Swedish alcohol policy - which is to reduce consumption and to shift it towards alcoholic beverages with lower alcohol contents - has had the intended results. Paper III considers the effects of Sweden's membership in the European Union in 1995. The results indicate that the Swedish government's attempt to retain tax revenues by increasing the excise duties on spirits may result in reduced tax revenue from both commodity groups, when excise duties on beer are decreased due to tax harmonisation. Paper IV applies the rational addiction model, which is a framework for the analysis of the decision to consume an addictive commodity that yields positive utility of consumption, even though that consumption could have a negative influence on health. The elasticities estimated for spirits and wine from the addictive model support the theory in comparison with elasticities from a traditional non-addictive model. Paper V uses individual data on self-reported consumption of spirits and compares the quantity consumed per period with how often to consume (frequency) and how much to consume on each occasion (intensity). The quantity hypothesis is rejected, and income and education levels turn out to be negatively related to intensity.

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