Preference shifts in consumer demand for beer and wine

Preference shifts in the demand for beer and wine are empirically investigated for Germany, the Netherlands, France and Italy. With the rise in disposable income we see a shift from the demand for beer to the demand for wine notably in the Netherlands and somewhat less clearly in Germany, and a shift in opposite direction in France and Italy during the reference period 1973-1994. These shifts cannot be explained by observed changes in relative prices but should be attributed to autonomous changes in preferences. The first step of the empirical analysis is the estimation of a demand function for beer and wine taken together. Given total demand for beer and wine we specify a function for the relative demand for beer (or wine) which is derived from a utility function with shifting parameters. The estimation results indicate that by taking these preference shifts into account we are able to estimate price elasticities for the relative demand for beer and wine.