Consumer demand, government revenues, and welfare effects from sectoral free trade : the case of alcoholic beverages in British Columbia
Date
1991
Authors
Pal, Stephen Edward
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Abstract
A "Linear Expenditure System" of consumer demand equations is estimated using monthly data on the sales of various kinds of alcoholic beverages in British Columbia over the period of April, 1981 to August, 1986. The estimation results are examined in view of the properties of consumer theory and the interpretation of consumer preferences, both aspects of which are compared to the evidence reported in earlier literature.
To the knowledge of the author, this thesis is the first time consumer preference estimates for alcoholic beverages are made for differing periods of the year.
The demand results are then combined within a simple general equilibrium model to simulate various scenarios of freer trade consistent with the Canada-United States Free Trade Agreement and the General Agreement on Tariffs and Trade rulings on the marketing of alcoholic beverages. Estimates are obtained under the various simulations run for the effects on alcoholic beverage demand, government revenues and consumer welfare. The results suggest free trade in all alcoholic beverages is a net benefit to B.C. consumers, the B.C. government, and the federal government's revenues on alcoholic beverages received from British Columbia.