Quasi-Experimental Price Elasticity of Liquor Demand in the United States: 1960-83

Baltagi, Badi H.; Goel, Rajeev K.

Quasi-Experimental Price Elasticity of Liquor Demand in the United States: 1960-83

American Journal of Agricultural Economics, Vol. 72, No. 2, pp. 451-454, 1990

Posted: 24 Sep 2014 Last revised: 5 Apr 2016

Badi H. Baltagi

Syracuse University - Maxwell School of Citizenship and Public Affairs; IZA Institute of Labor Economics; Syracuse University - Center for Policy Research

Rajeev K. Goel

Illinois State University - Department of Economics

Date Written: 1990

Abstract

This paper uses sixty-five recent tax changes on liquor in private licensed states over the period 1960-83 to update Simon's quasi-experimental price elasticity of liquor. Three alternative measures for liquor prices are used, and the sensitivity of this price elasticity to border effect purchases as well as market changes over time are examined. Our results support a liquor price elasticity estimate of -.7. However, the confidence interval on this estimate is wide. Border effect purchases as well as changes in the liquor market over time are statistically insignificant.

Keywords: bootlegging, liquor demand, quasi-experimental price elasticity

JEL Classification: D12

Suggested Citation: Suggested Citation

Baltagi, Badi H. and Goel, Rajeev K., Quasi-Experimental Price Elasticity of Liquor Demand in the United States: 1960-83 (1990). American Journal of Agricultural Economics, Vol. 72, No. 2, pp. 451-454, 1990. Available at SSRN: https://ssrn.com/abstract=2500448