Original Paper

Empirical Economics

, 37:599

First online:

Economic determinants of the consumption of alcoholic beverages in Canada: a panel data analysis

  • Tomson OgwangAffiliated withDepartment of Economics, Brock University
  • , Danny I. ChoAffiliated withFaculty of Business, Brock University Email author 

Rent the article at a discount

Rent now

* Final gross prices may vary according to local VAT.

Get Access


In this article, the economic determinants of the demand for three alcoholic beverages (wine, spirits, and beer) are investigated with a focus on the price, income and unemployment effects. The investigation is conducted within the fixed effects panel regression framework using a balanced panel for ten Canadian provinces spanning the years 1981–2004. The estimated own price elasticities indicate that increased government taxation is an effective tool for curtailing the consumption of spirits (at the expense of lower government tax revenue), but it is less effective for curtailing the consumption of wine or beer. The cross-price elasticity estimates reveal that taxing beer or spirits may not be an effective tool for encouraging consumption switch from these alcoholic beverages to wine in light of wine’s greater health benefits. Income emerges as an important determinant of the consumption of both wine and spirits but not of beer, whereas unemployment emerges as an important determinant of the consumption of beer but not of wine or spirits. With respect to unemployment, we find no support for the addiction hypothesis in the case of wine and spirits and strong support for the severe budget constraint hypothesis in the case of beer.


Alcoholic beverages Demand Panel data Elasticities

JEL Classification

C10 D12