Elasticities of Substitution for the Japanese Imports
Although lack of price data on beer for the past decade makes prediction impossible, we note that from 1962 to 1969 per adult beer consumption increasec1 by 16 per cent (USBA, 1970, p. 59) while real, per capita income rose by 27 per cent. Assuming stable real prices for beer, the implied income elasticity is 0.59. Average per capita income (1958 dollars) during 1962-1969 was approximately $2,250. At this level we estimate income elasticity as 0.37. Since average state taxes on beer increased about 7 per cent in real terms during 1962-1969 (USBA, 1970, p. 105), our estimate appears sufficiently close to warrant confidence in its reliability. Regarding implications for the future, it appears that the beer industry can anticipate moderate increases in consumption, assuming the price of beer remains relatively stable. Moreover, it further appears that excise taxes on beer could be reduced considerably with only modest losses in tax revenues. The desirability of such reductions might be questioned on noneconomic grounds; however, there appears little doubt that beer excise taxes are regressive. REFERENCES
- DOI
- 10.2307/1926283
- Volume
- 54 (2)
- Pages
- 198
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