The demand for beer and spirits in Ireland

This paper is primarily an attempt to estimate econometric demand equations for beer and spirits in Ireland, but it is hoped that it also sheds light on some of the general considerations involved in empirical demand analysis. The results, taken in conjuction with earlier studies, suggest that certain variables, in addition to price and income, play a significant role in such demand analysis in Ireland. A useful variable in this context is the dependency ration, which measures changes in the age structure of the population. The results also support the thesis that dynamic elements are of considerable importance in demand theory. The most serious technical problem encountered in the study was the high degree of multicollinearity in the explanatory variables. It emerged that some of the conventional rules of thumb normally used for identifying the existence of this problem failed to exercise sufficient discrimination, and this provides a salutary lesson