Coffee Demand Analysis in Greater China, Korea, and Japan: The Effect of Income, Prices, and Habit Formation

서지정보

· 발행기관 : 부산대학교 중국전략연구소
· 수록지 정보 : Journal of China Studies / 23권 / 1호 / 111 ~ 133페이지
· 저자명 : Barquin Valle, Maria Andrea, 이재우

초록

As income continues to increase in North East Asia, coffee consumption has become a new trend as the ‘Starbucks’ syndrome shows. Especially young and urban consumers in the region have become more ever more interested in coffee. The per capita consumption of coffee in this region is still much lower than in America and Europe. However, the potential demand for coffee as a percentage of the total population is much greater. This indicates that the coffee demand and consumption will continue to expand rapidly in emerging Asian markets. Particularly, consumers in five areas including China, Taiwan, Hong Kong, Korea and Japan, which use to drink tea, have now rapidly switched their drinking habits to coffee. This study evaluates whether, and if so, how incomes, prices, and drinking habits have influenced the coffee demand of the above five areas. In order to do so, an econometric model of coffee demand was specified according to a microeconomic demand theory: The demand of a good is determined by income, prices of own and related goods, and other control variables. To estimate the model, a panel data was constructed that covers GDP per capita, coffee consumption per capita, price of coffee and price of tea as a substitute in five areas such as China, Taiwan, Hong Kong, Korea and Japan during the period 1961-2013. The Pooled OLS model and cross-area fixed effect model are both estimated to see if there is any area-specific effect in coffee consumption. Both estimations end up producing qualitatively similar results, signifying that our models are very robust in supporting our hypotheses. One interesting feature about coffee demand is that drinking coffee is treated as ‘addicted or habitual’ consumption such that past consumption or pattern may influence present consumption over time. To evaluate the level of influence that coffee consumption habits have over the demand of coffee in this region, two different models were estimated: one without the habit formation effects and the other one with. The model excluding the habit formation effects variable showed that coffee behaves as a ‘luxury’ good (because the income elasticity of coffee demand turns out to be greater than 1) and disposable incomes exert the most significant influence over the coffee demand. Conversely, the model including the habit formation effects variable demonstrated that the previous model overestimated the impact of all the other variables and more specifically that coffee demand becomes less responsive to raises in disposable income and also changes in prices as coffee consumption habits are formed, hence influencing. To sum up the main results, coffee demand in these areas is strongly influenced by habit formation effects and is still relatively sensitive to income growth.

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