Affordability of alcohol as a key driver of alcohol demand in New Zealand: a co-integration analysis
Article first published online: 20 AUG 2012
© 2012 The Authors, Addiction © 2012 Society for the Study of Addiction
Volume 108, Issue 1, pages 72–79, January 2013
How to Cite
Wall, M. and Casswell, S. (2013), Affordability of alcohol as a key driver of alcohol demand in New Zealand: a co-integration analysis. Addiction, 108: 72–79. doi: 10.1111/j.1360-0443.2012.03992.x
- Issue published online: 26 DEC 2012
- Article first published online: 20 AUG 2012
- Accepted manuscript online: 22 JUN 2012 05:45AM EST
- Manuscript Accepted: 17 JUN 2012
- Manuscript Revised: 20 FEB 2012
- Manuscript Received: 21 DEC 2011
To investigate whether affordability of alcohol is an important determinant of alcohol consumption along with price. This will inform effective tax policy to influence consumption.
Co-integration analysis was used to analyse relationship between real price, affordability and consumption. Changes in retail availability of wine in 1990 and beer in 1999 were also included in the models. The econometric approach taken allows identification of short- and long-term responses. Separate analyses were performed for wine, beer, spirits and ready-to-drinks (spirits based pre-mixed drinks).
New Zealand 1988–2011.
Quarterly data on price and alcohol available for consumption for wine, beer, spirits and ready-to-drinks. Price data were analysed as: real price (own price of alcohol relative to the price of other goods) and affordability (average earnings relative to own price).
There was strong evidence for co-integration between wine and beer consumption and affordability. There was weaker evidence for co-integration between consumption and real price.
The affordability of alcohol is more important than real price in determining consumption of alcohol. This suggests that affordability needs to be considered by policy makers when determining tax and pricing policies to reduce alcohol-related harm.