Tuesday, December 31, 2013

Elasticity of Demand for Beer

Estimating the price elasticity of beer: Meta-analysis of data with heterogeneity, dependence, and publication bias
Jon Nelson 

Journal of Health Economics, January 2014, Pages 180–187 

Abstract: Precise estimates of price elasticities are important for alcohol tax policy. Using meta-analysis, this paper corrects average beer elasticities for heterogeneity, dependence, and publication selection bias. A sample of 191 estimates is obtained from 114 primary studies. Simple and weighted means are reported. Dependence is addressed by restricting number of estimates per study, author-restricted samples, and author-specific variables. Publication bias is addressed using funnel graph, trim-and-fill, and Egger's intercept model. Heterogeneity and selection bias are examined jointly in meta-regressions containing moderator variables for econometric methodology, primary data, and precision of estimates. Results for fixed- and random-effects regressions are reported. Country-specific effects and sample time periods are unimportant, but several methodology variables help explain the dispersion of estimates. In models that correct for selection bias and heterogeneity, the average beer price elasticity is about -0.20, which is less elastic by 50% compared to values commonly used in alcohol tax policy simulations. 

Nod to Kevin Lewis

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