Cold Comfort in Hard Times: Do People Drink More Beer during Recessions?
Do people drink more in hard times? Psychological theories suggest that alcohol consumption increases during recessions as a response to the stresses of economic downturns. In contrast, the conventional view among economists is that beer is a ‘normal’ good: when incomes go up, so does beer consumption. This chapter looks at U.S. state-level data as provided by The Beer Institute to estimate pooled time-series models of annual beer consumption regressed on economic and demographic variables. The empirical analysis confirms the economists' view, with beer consumption falling during recessions. The effect of economic fluctuations on consumption is rather small however; demographics have a far more significant and material effect, with larger shares of young adults in states' populations implying greater consumption of beer per capita.
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