The impact of prices on alcoholic beverage consumption in Chile.

Own-price elasticities reported for spirits, wines and beers are consistently negative, and inelastic, in line with international evidence. Although own-price elasticities for spirits is more inelastic than found in most studies, its quality-elasticity is more positive and greater. This could be explained by the greater price dispersion of spirits, as well as spirits (and wine) being consumed more than beers in Chile. This in turn may be because consumers have the option of switching to cheaper, Chilean-produced spirits such as pisco and wines when prices rise. The existence of these relatively broad quality-elasticities points to the need for a change in the alcohol tax structure from the current ad-valorem tax to a specific tax that could reduce price dispersion and curb total consumption.