An empirical analysis of Engel curves for beer in four major markets in the United States

Abstract

Beer has become one of the most important beverage commodities in the United States, but like all industries, brewing can be affected by economic booms and busts. Previous researches have focused on understanding the income elasticity of beer and the impact of economic downturns on demand for beer and other alcohol beverages. Building on these researches, this study expands the analysis of income effect and income elasticity for beer to consider potential differences across varieties of beer and types of brewers (e.g., macro- vs. micro-brewers). Using beer market shares data from four large metropolitan cities, the evidence suggests beer styles are mostly normal goods with positive income elasticities. In addition, significant income elasticity differentiation is identified among different categories of brewers.