Empirical Validation of Hicks and Slustky’s Theory of Income-Substitution effect on Wine Consumption in a Recession Period
Wine consumption in Nigeria has increased in the last two decades and plummeted in the last two years following a deepening economic down turn in Nigeria. This study is an attempt to validate theoretical position of substitution and income effect on consumption of wine in a recession period in Nigeria: Evidence from Abakaliki. In a period of economic recession individuals and households are rational in their consumption purchases because they tend to make consumption decisions that will maximize their satisfaction given their income and price of the commodity they wish to consume. In other to evaluate the price –income consumption behaviour of wine consumers in Abakaliki Metropolis, a total of 176 adult respondents were randomly selected and a questionnaire was administered through google form, processed and analysed. The study adopted qualitative response econometric approach using logit and probit estimation method. The response variable is consumer switching behaviour whereas the explanatory variables include: gender, age, habit, income, price, price of substitutes, economic hardship, belief system, advertisement health condition and change of location. The result obtained revealed that increase in price of wine by one percent significantly lowers the consumption of wine by 16 percent whereas increase in income of low income group to middle income increases wine consumption to about 2.3 percent and moving from middle income to high income increases wine consumption by about 16 per cent.. The result also indicated that, age, gender, economic hardship and health status have negative effect on consumers switching behaviour of wines in Abakaliki. The study found that individual wine consumers tend to alter their preferences of wine consumption due to changes in income price and price of substitutes. The study therefore validates Hicks and Slustky’s theory of income-substitution effect on change of consumption since, increase in wine consumption is significantly and positively related to increase in income and rise in price. The study therefore recommends that the government should complement household income to make wine shops, retail and whole sales, cuisines restaurants and the entire hospitality industry sub sector to contribute towards Nigeria’s inclusive growth.