Opinion

Felix Salmon

Beer-drinking charts of the day

By Felix Salmon
April 20, 2011

How do we know that the world is getting happier? It’s drinking more beer! Here’s the chart, from a new paper by Liesbeth Colen and Johan Swinnen:

vlume.tiff

What we’re seeing here is largely the China effect — and, more generally, a world where poor people, once they reach a certain minimum income, start hitting the hops.

consmption.tiff

By all indications, we’re still in the early days of this trend, whereby countries slowly converge in terms of per-capita beer consumption. For while China and Russia are soaring, the main beer-drinking nations of the world are all in decline:

In middle and low income countries which experience growth, such as China, Russia, Poland and India, beer consumption grows. In rich countries, however, further growth has led to a reduction in beer consumption per capita.

This is an economics paper, so of course there has to be some kind of regression analysis — in this case OLS, or ordinary least squares:

Our first important result is that we do indeed find an inverted-U shaped relation between income and per capita beer consumption in all pooled OLS and fixed effects specifications. From the pooled OLS regressions (Table 3), we find that countries with higher levels of income initially consume more beer. Yet, the second order coefficient on income is negative, indicating that from a certain income level onwards, higher incomes lead to lower per capita beer consumption. The first and second order effects for income are strongly significant and the coefficients are quite robust across the different specifications.

The fixed effects regression results confirm this (Table 4), so the non-linear relationship for income holds not only between countries, but also within individual countries over time. As a country becomes richer, beer consumption rises, but when incomes continue to grow, beer consumption starts to decline at some income level. We calculated the turning point, i.e. the point where beer consumption starts declining with growing incomes, to be approximately 22,000 U.S. dollars per capita.

I would imagine that this relationship could also be found within the U.S. — that states increase their beer consumption as they grow to an income of about $22,000 per capita, and thereafter see their beer consumption drop as their wine consumption increases.

I can also imagine that we’re going to see a China-driven surge in global wine consumption when the middle class population there starts earning that kind of money. In the first instance, most Chinese wine consumption will probably be domestic, but over the long term it’s surely inevitable that wine imports into China will stop being concentrated at the high end of the market and will start lubricating China’s middle classes on an everyday basis. But that’s probably not going to happen for a decade or two yet.

(Via Florida)

Comments
13 comments so far | RSS Comments RSS

A. Beer is a depressant; people aren’t getting happier, but rather, using alcohol to relax from the increased tension of earning more money. The next level of progression, of course, is a bit of mary jah wah na, as Mr. Mackey would say.

B. Alcohol exists in localized forms all over the world; traditional eastern cultures use rice-based alcohol; south-pacific uses root-based kawa-kawa, and so on. Western forms of alcohol might merely be displacing traditional forms of intoxication.

Posted by GRRR | Report as abusive
 

I’d like to see a chart graphing beer advertising expenditures placed on top of those charts. China becoming more open to foreign investment after 1990 appears to be a catalyst for increased consumption, with another bump in 2003, perhaps due to the fierce rivalry of a-b and sabmiller as they continued shifting from domestic to international growth.

Posted by thispaceforsale | Report as abusive
 

The Chinese middle-class wine surge is going to have interesting effects on the global wine market. Domestic Chinese grape wine is barely extant, and undrinkable to the extent that it exists. And China is about as ideal a country for viniculture as the UK.

So there’s going to be an odd bottom-level drag on wine markets as Chinese demand for wine grows – basically, that the kind of dregs-level wine that gets sold as 2 Buck Chuck in CA or poured down the drain in Aus will still be worth shipping in a tanker to China, as long as it’s a cheap tanker. And they’ll stick it in a bottle and pretend it’s nice.

It’ll be like the UK wine market in the 1970s, but cheaper.

Posted by johnband | Report as abusive
 

or they could just be drowning their sorrows in an inexpensive libation.

@johnband – they will put the Two Buck Chuck stuff in $45,000 Chateau Lafite bottles to get passed around as gifts in China.

Posted by ErnieD | Report as abusive
 

So true Ernie…

Also a reminder that cheap libation/alcoholism/alcoholics anonymous all stem back to the Great Depression. People use alcohol as a depression buster, but it isn’t.

Sadly, meat consumption is rising even as more people are becoming vegetarians, because the wealthier are consuming more. Is that a sign of happier times when the land will be used to feed beef instead of crops even when grain crops are failing?

So the happier world is a fallacy, best served with an dash of denial, expensive fine wine and Chateaubriand.

Posted by hsvkitty | Report as abusive
 

it would seem your model specification is questionable. there likely exists heteroskedasticity in your data, as well as omitted variable bias. Your data are time series and it does not appear that any stationary testing has been performed. One might conclude, from the latter observation alone, that the robust results are due only to spurious findings relating to a correlation or common trend. I’m sorry but i find it difficult to support any statistical inferences from this; to say nothing of other assumptions involved in the conclusions made overall. More information would be helpful with respect to econometrics or at least a link to the full paper.

Posted by mortdenikiya | Report as abusive
 

The rise in beer is evident but where is the rise in wine? Or is it just that it starts from a very low level and peaks out much sooner?

Posted by MyLord | Report as abusive
 

“”people aren’t getting happier, but rather, using alcohol to relax from the increased tension of earning more money”"

Wow, you’re REALLY good at reading into numbers. You can suss out behavioral economics without any experience in the issue whatsoever!! I’m amazed. It couldn’t be as simple as simply overlaying your socio/political preconceptions onto any data… people wouldn’t do that….that would be silly…

“”Sadly, meat consumption is rising even as more people are becoming vegetarians, because the wealthier are consuming more. “”

… or maybe not.

If by ‘wealthy’ you mean the hundreds of millions of people in china and india who are increasing their meat consumption because they now spend the meagre extra income they make on consumable luxury (aka MEAT), then I suppose that’s a viable interpretation.

Or, no – it’s just you saying to yourself, “Vegetarian = Good / Meat = Bad ; all data must reinforce this view”

Its funny – there are like 6 posts here… and like 4-5 of them are completely specious nonsense… just because it’s BEER! Gotta love it. Cheers to the chinese!

Posted by BBERDUDE | Report as abusive
 

@mortdenikiya the link’s right there, in the very first paragraph!

Posted by FelixSalmon | Report as abusive
 

@mortdenikiya the link’s right there, in the very first paragraph!

Posted by FelixSalmon | Report as abusive
 

@mortdenikiya the link’s right there, in the very first paragraph!

Posted by FelixSalmon | Report as abusive
 

~
What I saw on the first chart was that between 1961 and the present, beer consumption in the world roughly tripled.
But guess what?
During that same period the world’s population also roughly tripled.
My conclusion: Nothing changed in worldwide per capita consumption of beer over the last 50 years.
Or “other alcoholic beverages”, which also roughly tripled.
However, by wine consumption laying roughly flat while world population tripled, wine drinking per capita has fallen greatly.
I guess that something must be done.
Please excuse me as I go to my refrigerator…..

Ha Ha Ha

~

Posted by Bjimmer | Report as abusive
 

Get over yourself @BBERDUDE; firstly I am not a vegetarian (although I admit to eating very little to be more ethically responsible, save money and keep weight off) and had just read the information relayed to you as it was in the headlines. Sadly I could not find the same headlines but managed to get some data for you.

meat and food consumption
http://tywkiwdbi.blogspot.com/2011/03/am erican-meat-consumption.html

http://www.ourfutureplanet.org/news/542

http://www.guardian.co.uk/environment/20 11/mar/10/world-food-prices-climbing

The more wealthy a nation becomes, the more meat consumption
http://nextbigfuture.com/2011/01/mckinse y-has-six-predictions-for-china.html

It takes up to 16 pounds of grain to produce just 1 pound of edible animal meat. According to the USDA and the United Nations, using an acre of land to raise cattle for slaughter yields 20 pounds of usable protein. That same acre would yield 356 pounds of protein if soybeans were grown instead.

http://www.berkeleycollege.edu/GreenPath  /Newsletter/July_09_2.htm

Food consumption charts
http://www.fao.org/DOCREP/005/AC911E/ac9 11e05.htm

Posted by hsvkitty | Report as abusive
 

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