An Econometric Analysis of Total Demand For Alcoholic Beverages in the U.K., 1956-75

THIS is a report on an inquiry into the possible effect of advertising on total demand for alcoholic beverages in the UK. The reported research used multiple-regression techniques to estimate the statistical relationship between demand and advertising. The empirical work uses UK annual data over the period 1956-75. There is in existence a number of empirical studies that have used regression techniques to analyse the determinants of total demand for alcoholic beverages, or for a type of such beverage. Some limitations important in interpreting the results of these studies are discussed in Osterberg [9], which also contains a review of some of this earlier work. Since the studies relate either to a geographical area other than the UK, or to an earlier time period than the one chosen here, or do not select advertising as one of the variables related to demand an extensive review of this literature is omitted from this report. Section II discusses the specification of the relationship between total market demand and advertising. Different types of alcoholic drinks (beers, spirits, wines, and ciders) were aggregated, in terms of both their value and their pure-alcohol content. Consumption of pure alcohol might have physiological effects that depend on the form of beverage in which it is consumed. If this is so the research reported here needs supplementing by a more disaggregated study if the health implications of changes in total consumption of pure alcohol are to be assessed fully. Section III reports the results of the empirical work. The economic and policy implications of these results are outlined in Section IV. Section V summarizes the conclusions of the research. A number of appendices give information about the data and notation used. Apart from being of direct use to the formation of any policy to curb alcohol consumption, the results offer yet another test of the Galbraithian