Booms and booze: on the relationship between macroeconomic conditions and alcohol consumption.

Abstract

This paper investigates the relationship between macroeconomic conditions and alcohol consumption using country-level data from 159 countries between 1961 and 2004. We use the change in per capita alcohol consumption as the main dependent variable and the growth of per capita gross domestic product as main independent variable. Overall, we find a robust procyclical relationship. Furthermore, our results suggest that whereas high-, middle-, and low-middle income countries show a clear procyclical trend, drinking behavior in low-income countries remains largely unchanged following macroeconomic shocks. Studying different alcoholic beverages, our results indicate that the consumption of spirits is most sensitive to economic swings, whereas the consumption of wine and beer is less elastic.