Alcohol Consumption Across Income Groups: How Do Consumers Respond to Price Changes?

In recent decades, Russia has pursued an active anti-alcohol policy. This includes setting a minimum price for alcohol and raising excise duties. However, since 2017, the effectiveness of these measures has declined, while total alcohol consumption has increased. This paper analyses how people with different income levels respond to changes in the price of alcoholic beverages. Using data from the Russian Longitudinal Monitoring Survey–HSE (RLMS) and Rosstat from 2011 to 2022, we examined the alcohol consumption behaviours of different income groups. Two-step Heckman models and instrumental variables were used to calculate the price elasticity of vodka, beer and dry wine consumption in groups with different income levels. The study found that the response to changes in prices of vodka, beer and wine varies greatly between the wealthiest and least wealthy consumer groups. Those with the lowest incomes demonstrate the lowest elasticity of vodka consumption (from -0.123 to -0.196 depending on the number of groups considered) and the highest price elasticity of wine consumption (from -1.41 to -1.52). Conversely, high-income consumers are the most sensitive to increases in vodka prices (consumption elasticity from -0.235 to -0.273) and the least sensitive to increases in wine prices (from -0.618 to -0.694).