J Fam Econ Iss (2009) 30:149–159
DOI 10.1007/s10834-009-9148-9
ORIGINAL PAPER
Factors Affecting Alcohol Purchase Decisions and Expenditures:
A Sample Selection Analysis by Ethnicity in Malaysia
Andrew K. G. Tan Æ Steven T. Yen Æ
Rodolfo M. Nayga Jr.
Published online: 27 February 2009
Ó Springer Science+Business Media, LLC 2009
Abstract Heckman’s sample selection model was
applied to data from the Malaysian Household Expenditure
Survey 2004/2005 to examine the factors influencing the
likelihood of purchasing and the amount spent on alcohol
in Malaysia. Results of the marginal effects suggest that
while socio-demographic factors are important determi-
nants of household purchase decisions and expenditure
levels on alcohol in Malaysia, the effects vary across ethnic
groups. Specifically, although education had a significant
but modest impact in reducing the probability of alcohol
purchases and expenditure levels among ethnic Chinese
households, this effect was not evident among the ethnic
Indians and other races. While increasing household size
lowered the likelihood of purchasing alcohol and its
expenditure levels for all ethnic groups, the reinforcing
effects of both income and gender were relevant only for
ethnic Chinese and Indian households. Last, urban Indian
households were less likely to purchase alcohol and spend
less compared to rural Indian households.
A. K. G. Tan
School of Social Sciences, Universiti Sains Malaysia,
11800 Penang, Malaysia
e-mail: atan@usm.my
S. T. Yen (&)
Department of Agricultural Economics, The University
of Tennessee, Knoxville, TN 37996-4518, USA
e-mail: syen@utk.edu
R. M. Nayga Jr.
Department of Agricultural Economics and Agribusiness,
University of Arkansas, Fayetteville, AR 72701, USA
e-mail: Rnayga@uark.edu
Keywords Alcohol expenditures
Malaysia

Purchase decisions
Sample selection model

Socio-demographics
Introduction
Alcohol is considered one of the favorite beverages in East-
and Southeast Asia. Consumption is predominant among the
developed economies of the Republic of Korea and Japan,
with recorded consumption of all types of alcohol by adults
over 15 years of age averaging above 7.0 litre per capita
(Fig. 1). This is followed by the middle-tier consuming
countries, consisting of Thailand, China, North Korea,
Philippines, Mongolia and Singapore, whereby per capita
consumption averages between 2 and 5 litre among adults
15 years and older. Other countries, such as Malaysia,
Cambodia, Vietnam, and Myanmar, round up the remaining
cluster, with per capita consumption averaging between 0.2
and 1 litre (World Health Organization [WHO] 2007).
Nevertheless, while not highly ranked among East- and
Southeast Asian countries, the latest figures of alcohol
consumption in Malaysia indicate a prevalence rate of
12.2% of the population, with about 1.5 million current
drinkers aged 25–64 years. Ethnically, although only 0.4%
of Muslim Malays between 25 and 64 years are current
drinkers due to religious prohibitions, 24.2% of Chinese,
21.1% of Indian, 37.6% of Bumiputera (indigenous
natives), and 8.3% of those of other races are current
drinkers (Ministry of Health Malaysia 2006). In contrast,
the total population of Malaysia consists of 53.3% Malay,
26.0% Chinese, 7.7% Indian, 11.7% Bumiputera and 1.2%
of those of other races (Department of Statistics Malaysia
2000). Men are also the predominant drinkers in Malaysia.
Among non-Muslim men between 25 and 64 years, 38.4%
123
150
Fig. 1 Recorded adult per Litres of Alcohol
capita consumption of alcohol 10
(age 15? years)—Selected
9
East- and Southeast Asian
countries. Source: WHO (2007) 8 Rep. of Korea
6
5
4
3 Mongolia
2
1 Vietnam
0
1990 1991 1992 1993
of Chinese, 44.4% of Indian, 55.3% of other Bumiputera,
and 18.2% of other races consume alcohol (Ministry of
Health Malaysia 2006).
In catering to this demand, alcoholic beverage sales
have increased steadily by about 27% from US $176 mil-
lion in 2000 to US $223 million in 2004 (WHO 2007). The
alcohol industry growth is further evidenced by its total
asset investments of US $315 million, while contributing
to the Malaysian economy via direct annual employment
costs (US $29 million), employment of over 500,000
people directly and indirectly, advertising and promotion
(US $57 million) and packaging (US $14 million) (Con-
federation of Malaysian Breweries Berhad 2007). These
realizations are conspicuous despite the fact that the
Malaysian government does not formally endorse alcohol-
related activities as its official Muslim religion forbids any
form of alcohol consumption.
However, the Malaysian alcohol industry is also often
besieged by undesirable social problems. First, labor pro-
ductivity in Malaysia is adversely affected as studies have
shown that alcoholics often perform 25% below average in
work-related activities and are 16 times more likely to be
absent from their workplace (Assunta 2001b). Second, road
safety issues are major concerns as the Road Safety
Council of Malaysia estimates that about 30% of road
accidents in Malaysia are caused by drunk driving (Assunta
2001a). Third, alcohol may also be a poverty exacerbating
factor as it is conceivable for a rural laborer to spend about
Ringgit Malaysia (RM)300 (US $94) monthly on alcohol,
which is about the average monthly wage rate for such
occupations (Assunta 2001a).1 Fourth, excessive drinking
1
As of December 2008, the exchange rate was approximately US
$1.00 = RM3.55 or RM1.00 = US $0.28.
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J Fam Econ Iss (2009) 30:149–159
Japan
Thailand
China
North Korea
Philippines
Singapore
Cambodia
Malaysia
Myanmar
Indonesia
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
is often the source of domestic disputes as Assunta (2001a)
noted that in most cases of spousal abuse, ethnic Chinese
and Indian victims often listed influence of alcohol as the
leading cause, while across all ethnic groups, the same
reason ranked second. Other domestic problems caused by
undue drinking habits may include home discords, and
abused and deprived children. Last, health effects are sig-
nificant; George and Chin (1998) found alcohol-induced
psychotic disorder to be a serious problem in Malaysia.
Rosaida and Goh (2004) also found that alcohol con-
sumption is a contributing factor for gastro-oesophageal
reflux and reflux oesophagitis diseases.
Previous studies on micro-level alcohol demand using
disaggregated cross-sectional household data can be found
in the literature (Abdel-Ghany and Wang 2003; Manrique
and Jensen 2004; Nayga 1996; Nayga and Capps 1994;
Pan et al. 2006; Ramful and Zhao 2008; Yen 1994, 2005;
Yen and Jensen 1996, among others). However, despite
the steady growth trend, considerable economic signifi-
cance and negative social effects, a review of the
literature indicates that there exists a dearth of such
econometric analyses on the demand for alcohol in
Malaysia.
This study attempts to bridge the gap in the literature by
providing a detailed econometric analysis of the role of
socio-demographic factors on purchase decisions and
expenditures on alcohol (including whisky, brandy, vodka,
rum, gin, wine, beer, stout, shandy, ‘‘samsu’’, ‘‘tuak’’)
among households in Malaysia. A better understanding of
how socio-demographic factors influence the likelihood of
purchasing and the amount spent on alcohol may be
important to policymakers to balance intervention strate-
gies that minimize the possible negative impact of alcohol
consumption while further enhancing its potential benefits
to the economy.
J Fam Econ Iss (2009) 30:149–159 151

The Sample Selection Model Prðy [ 0Þ ¼ Uðz0 aÞ ð3Þ

In demand studies with micro survey data, a common the unconditional mean of y is


problem that arises is that large clusters of respondents may Eð yÞ ¼ exp x0 b þ r2 =2 Uðz0 a þ qrÞ: ð4Þ
report zeros on the quantities consumed or amount spent.
The Tobit model (Tobin 1958) is often used to model con- Marginal effects can be obtained by differentiating (or
sumer demand with such censored data (Craig 2007; Fusaro differencing, in the case of a discrete explanatory variable)
2008; Jianakoplos and Bernasek 2008; Tomohara and Lee Eqs. 2–4 (Yen and Rosinski 2008), evaluated at the sample
2007, among others). However, the use of the Tobit model means of explanatory variables.
may be unduly restrictive as it implicitly assumes that the
explanatory variables have the same impact on the proba-
bility of participation and the amount consumed or spent. Data and Variable Definitions
To accommodate the possible dissimilar influences
between the likelihood of drinking and the amount of The Survey
expenditures spent on alcohol, the less restrictive and yet
consistent and asymptotically efficient estimation approach The data set used in this study was the Malaysian House-
of a sample selection model (Heckman 1979) was utilized hold Expenditure Survey 2004/2005 (MHES) collected by
in the current study. The sample selection model, also the Department of Statistics Malaysia (2005). This data set
known as type 2 Tobit model (Amemiya 1985, p. 385– is the most recent of the national household expenditure
387), is characterized as surveys. The sample was designed using a stratified multi-
stage, area probability sampling method, thus ensuring that
log y ¼ x0 b þ v if z0 a þ u [ 0 socio-economic and geographical considerations were
ð1Þ
y¼0 if z0 a þ u  0 taken into account to reflect the Malaysian population.
In the survey, respondents were asked to record their
where y is the dependent variable, x and z are vectors of
total monthly expenditures on alcohol consumption. In
explanatory variables, b and a are conformable vectors of
addition, socio-economic and other demographic charac-
parameters, and the error terms (u, v) are distributed as
teristics of the respondents were recorded. While a total of
bivariate normal distribution with zero means, standard
14,084 households responded to this survey, 14,082
deviations (1, r) and correlation q. The model can be
observations with complete information were available for
estimated by the method of maximum likelihood; see
analysis. However, since Muslim Malays are strictly for-
Amemiya (1985, p. 386) for the likelihood function, but
bidden by religion and culture to consume any alcoholic
insert the Jacobian term y-1 of the transformation from log
beverages, the sample used in this analysis comprised only
y to y for the non-zero observations.
non-Malays. As such, a final total of 6,117 households
Although marginal effects of explanatory variables were
were used in this analysis, which includes 3200 Chinese
often not fully explored in earlier applications of Heckman’s
(52.31%), 810 Indians (13.24%), and 2,107 households of
and other sample selection models (e.g., Brandon 2000; Chi
other races (34.44%). The numbers of households reporting
and Hsin 1999; Hatcher 2002; Weagley et al. 2007; White–
alcohol expenditures during the survey period were 724
Means and Rubin 2004), such marginal effects can provide
Chinese (66.42%), 126 Indians (11.55%), and 240 house-
more useful information than the regression estimates. In
holds of other races (22.02%). The proportions of
applications of the log-transformed sample selection mod-
households not spending on alcohol suggest that it is
els, marginal effects were often calculated by differentiating
important to accommodate zero observations in the
the conditional mean of the logarithm of the dependent
expenditure.
variable (e.g., Cheng and Capps 1988; Hoffman and Kassouf
2005). Yen and Rosinski (2008) showed that such approxi-
mation can lead to substantial errors, and presented the The Variables
conditional mean of the dependent variable and marginal
effect formulas for a log-transformed sample selection Given the lack of domestic empirical research on the
model. Denote the standard normal cumulative distribution subject, the selection of variables likely to affect household
function as U(
). Then, the conditional mean of the depen- decisions and expenditures on alcoholic beverages relies on
dent variable y is (Yen and Rosinski 2008) the previous studies by Harris et al. (2006), Nayga (1996),

Pan et al. (2006), Yen (2005), Yen and Jensen (1996) and
Eðyjy [ 0Þ ¼ exp x0 b þ r2 =2 Uðz0 a þ qrÞ=Uðz0 aÞ: ð2Þ
Zhao and Harris (2004). The following socio-demographic
Since the marginal probability of a positive observation is: characteristics were therefore hypothesized to influence the

123
152 J Fam Econ Iss (2009) 30:149–159

probability and amount of expenditures on alcohol: (a)
ethnicity/race, (b) education level, (c) gross monthly
household income, (d) household size, (e) age of household
head, (f) occupation type, (g) location of residence, and (h)
gender of household head (Table 1).
Studies by Gius (2005), Nayga (1996), Yen (2005) and
Yen and Jensen (1996) suggest that ethnicity and race be
included to allow for the possibility of cultural and taste
differences to influence alcohol expenditures. Whereas
most of these previous studies compared Caucasians,
African Americans, Hispanics, and Asians in their ethnic-
ity/race categories, the unique racial composition in
Malaysia allows a comparison of three distinct races
(Chinese, Indian, and others who are of native descent) and
cultures to influence alcohol consumption behavior. In the
current study, respondents were segregated into Chinese
(base group), Indian, and Other races to allow for the
possibility of cultural, ethnic and religious differences to
influence alcohol purchasing decisions and expenditure
patterns among Malaysians.
Previous researchers have found education to be a sig-
nificant factor in alcohol participation and expenditure
patterns. In general, Harris et al. (2006) found that the more
educated individuals are more likely to consume alcohol
moderately and frequently, although Jones (2002) noted
that current alcoholism and current and past heavy drinking
were strongly and negatively associated with years of
schooling among women. Given the heterogeneous nature
of alcohol, Nayga (1996) and Zhao and Harris (2004)
found that education level had a significant and positive
effect on wine but negligible impacts on beer and spirits,
implying that the three alcoholic products of wine, beer and
spirits relate to rather different population groups in soci-
ety. Yen (2005) also reported positive effects of education
on the probability of consuming beer and wine for both
men and women. Using data from China, Pan et al. (2006)
concurred and attributed these results partly to job security
and a more active social lifestyle for those who are higher
educated compared to those with less education. In the
current study, the number of years of formal education
possessed by the household head was used, with the range
varying from those without any formal education (0) to
those with tertiary education (17 years). In addition, we
also examined the effects of education for those with high
school education (12 years of education) compared to
those with college education (16 years and above).
In examining Australian alcohol consumption, Ramful
and Zhao (2008) considered type of main activity (work,
unemployed, study, and others) and its likelihood of con-
suming beer, wine and spirits, and concluded that
Australians who work and study were more likely to drink
wine and those who mainly study were least likely to drink
spirits. Main activity did not seem to matter much for beer
consumption. Pan et al. (2006) also noted that individuals
with a full time or part time job in China were more likely
to consume beer than those not working. However, based
on data availability in our current study, we considered
occupation type with a dummy variable to denote the status

Table 1 Variable definitions and sample statistics: segmented samples by ethnic groups and pooled sample
Variables Definitions Sample means
Chinese Indian Others Pooled

Expenditure Household (HH) alcohol expenditure (RM/mth) 21.29 (91.36) 10.47 (40.98) 11.46 (63.67) 16.47 (77.52)
(dependent variable)
Consuming HH (n = 1,090) 94.09 (173.41) 67.32 (83.74) 100.60 (163.45) 92.43 (163.47)
Continuous explanatory variables
Educ Years of formal education of HH head 8.61 (4.74) 8.78 (4.64) 6.94 (4.89) 8.06 (4.85)
Income Gross monthly HH income (in RM) 3681.30 (3167.8) 3059.91 (2547.0) 2132.82 (2683.1) 3065.65 (3014.0)
Hhsz Total number of family members in HH 3.95 (1.99) 4.32 (2.06) 4.35 (2.44) 4.14 (2.17)
Age Age of HH head (in years) 49.99 (13.53) 47.32 (13.23) 41.30 (13.10) 46.64 (13.92)
Binary explanatory variables (yes = 1, no = 0)
White-collar HH head is a white-collar worker 0.31 0.26 0.17 0.26
Urban HH resides in an urban area 0.87 0.81 0.65 0.79
Male HH head is male 0.85 0.83 0.82 0.84
Age 15–30 HH head between 15 and 30 years old 0.07 0.09 0.22 0.12
Age 31–56 HH head between 31 and 56 years old (refer.) 0.63 0.68 0.65 0.65
Age C57 HH head is C57 years old 0.30 0.23 0.13 0.23
Note: Standard deviations are in parentheses. Source: Compiled from Malaysian Household Expenditure Survey 2004/2005 (Department of
Statistics Malaysia 2005)

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J Fam Econ Iss (2009) 30:149–159
as a white-collar worker. The relationship between this
variable and alcohol purchase decisions and expenditures
will be ascertained.
Studies have found that individuals from urban and
suburban areas are more likely to consume alcohol than
individuals from non-metro areas (Nayga 1996; Nayga and
Capps 1994; Pan et al. 2006; Yen 2005). However, Man-
rique and Jensen (2004) found that urban location had a
negative impact on alcohol expenditures in Spain, sug-
gesting that public policies and education programs
intended to decrease the level of expenditures on alcohol
should focus specifically on rural households. In this study,
a dummy variable was used to indicate a rural household.
The relationship between this variable and household
decisions and amount of expenditures on alcohol will have
to be examined further.
Household size was also included to examine its effect
on the probability of purchasing and its magnitude of
expenditures on alcohol. Nayga (1996) noted that smaller
households spend more on beer and wine away from home
than do larger households. One possible explanation is that
an increase in household size may generally induce a
proportional increase in household expenditures, especially
on basic necessities. Therefore, larger households are
hypothesized to be less likely to spend on alcohol than
smaller households, with the assumption that alcoholic
beverages are not necessity goods. As such, the relation-
ships between household size and the likelihood of alcohol
purchase decisions and expenditures are both expected to
be negative.
The inclusion of gender in the current model is desirable
as it may reflect the different gender preferences and
behaviors that could influence alcohol consumption
behavior. Yen (2005), for instance, found gender differ-
ences in the consumption of beer and wine, along with
cigarettes. Zhao and Harris (2004) noted that while men
were more likely to consume beer, women had a greater
probability of consuming wine and spirits, other factors
remaining constant. On the other hand, Harris et al. (2006)
and Pan et al. (2006) found that male-headed households in
Australia and China, respectively, were more likely to
drink wine and beer than those with female household
heads. Sharpe et al. (2001) also stated that Korean males
were most likely to consume alcoholic beverages as well as
spend more among those who drink. It is therefore
hypothesized that households headed by males will have a
higher likelihood to consume and also spend more on
alcohol than female-headed households.
Total monthly household income is also expected to
influence household alcohol spending patterns. While Yen
(2005) found that income did not play a role in alcohol
consumption, studies by Harris et al. (2006), Nayga (1996),
Pan et al. (2006) and Yen and Jensen (1996) have
153
consistently shown that income levels have a positive
influence on the chances of drinking and expenditure lev-
els. In general, it can be assumed that households with
higher disposable incomes have a higher tendency to
consume alcohol because they are more likely to be able to
afford it. Therefore, it is hypothesized that household
income will be positively related to alcohol purchase
decisions and expenditures.
Finally, age of the household head and age groups
denoting younger (age 15–30), middle-age (age 31–56) and
retiree (age C57) households were used in the current
model with the assumption that differences in age and life-
cycle patterns lead to variations in preferences and
expenditure patterns for alcohol consumption. For instance,
Nayga (1996) found that the probability of wine con-
sumption increases with age, while Zhao and Harris (2004)
confirmed this result albeit at an age decreasing rate. On
the other hand, the participation probability of beer
revealed an inverted U-shaped age profile as those between
30 and 35 years were most likely to consume beer, while
the probability declined sharply for younger people and
declined slowly for those older than 35 years. Yen and
Jensen (1996) also noted that age was inversely related to
household alcohol expenditures as households with
younger heads had relatively higher alcohol expenditures.
On the other hand, Yen (2005) found that as an individual
(man or women) got older, the probability of consuming
beer decreased but the probability of consuming wine
increased, while the effect of age was also negative on the
level of beer consumption for men. A likely rationalization
for the above findings is that age can contribute to differ-
ences in tastes and preferences. However, given that this
study did not differentiate between beer and wine, no
a priori hypothesis was assumed.
Characteristics of Survey Respondents
Sample statistics are presented in Table 1.2 Average
household expenditure on alcohol amounted to RM16.47
for the overall sample compared to RM92.43 among the
consuming households. Within the entire sample, the
average education attainment of the household head was
slightly more than 8 years of formal education (at least high
school education) and the average household size was 4.
In terms of ethnicity, 52% of the total sample was
Chinese, with about 13% Indians and 34% of other races.
Our sample, as mentioned earlier, excluded the Malays.
Interestingly, 22.65% of Chinese, 29.63% of Indian and
11.39% of those of other races consumed alcohol. With
2
A comprehensive discussion of the characteristics of the respon-
dents can be obtained from the authors.
123
154
26% of the total sample classified as having white-collar
occupations, these households had an average monthly
income of about RM3,065 (US $958). About 79% of the
sample resided in urban areas, with 84% being headed by
males. The average age of the household head was
47 years. Twelve percent of the sample was in the younger
age group between 15 and 30 years old; 65% in the middle
age group between 31 and 56 years old; and 23% were
retirees in the 57 years and above age group (Table 1).
Estimation Results
Maximum-likelihood estimation was carried out by maxi-
mizing the likelihood function in Amemiya (1985, p. 386),
with asymptotic standard errors of estimated parameters
calculated by White’s (1982) robust covariance estimator.
Our empirical strategy included first testing for the appro-
priateness of the use of pooled sample versus stratified
samples by ethnicity. Denote the maximum log-likelihoods
for the Chinese, Indian, others and pooled samples as
logLc ; logLi ; log Lo and log Lp ; with corresponding num-
bers of parameters kc, ki, ko and kp, respectively. Then
the
test statistic LR ¼ 2 log Lc þ log Li þ logLo  log Lp is
v2 -distributed with kc ? ki ? ko - kp degrees of freedom
(df). The parameter estimates are not presented due to space
consideration but we summarize the results here.3 Accord-
ing to the separate- and pooled-sample results, the
hypothesis of equal parameters across ethnic groups was
rejected (LR = 70.05, df = 40, p value \0.003), suggest-
ing the analysis by segmented samples. One other empirical
issue in the estimation was the choice of regressors. As in
other sample selection models, use of exclusion conditions
can be useful in identifying the model parameters. While
there was no a priori exclusion conditions for the current
sample, our empirical approach was to use an age variable
and its squared term (to capture the nonlinear relationship
between age and alcohol purchase probability) in the
selection equation and two age category variables in the
level equation. Use of such different sets of variables in
the two equations guarantees that the model identification
conditions were met.
According to the parameter estimates for all samples (not
presented), the error correlation coefficients (q) were all
significant at the 1% level. Statistical insignificance of the
error correlation would have suggested absence of endoge-
nous sample selectivity, in which case estimation of the
restricted (independent) model, known as the two-part
model, could be broken down to two parts: binary probit
regression based on the whole sample and ordinary least-
squares regression based on the consuming households. As
3
Parameter estimates for all samples are available upon request.
123
J Fam Econ Iss (2009) 30:149–159
to goodness of fit, at a probability cut-off of 0.5 (Wooldridge
2002, p. 465), the percentages of correct predictions were
77.3%, 84.4% and 88.8%, respectively, for the Chinese,
Indian and others samples. On prediction of expenditure
levels, the corresponding mean absolute errors (MAE) were
RM22.2, RM10.3 and RM13.3. The magnitude of the MAE
is relatively large, suggesting the possibility of omitted
variable problems and the lack of model fit. However, such
poor fit is not atypical in cross-sectional analysis given that
data availability may limit model specification.
With separate equations to accommodate sample selec-
tion and level, and with the logarithmic transformation in
the dependent variable, the effects of explanatory variables
on the level of expenditures are non-trivial. To further
explore the effects of explanatory variables, we calculated
the marginal effects of these variables on the probability
and levels of expenditures according to the procedure
discussed above and in Yen and Rosinski (2008). The
results are presented in Table 2 for the pooled sample and
in Table 3 by ethnicity. The effects of binary explanatory
variables on the probability, conditional level, and uncon-
ditional level are evaluated by simulating a finite change
(e.g., from 0 to 1) in each variable, ceteris paribus. For
statistical inference, standard errors of all marginal effects
were calculated using the delta method (Greene 2007).
Pooled Sample
The marginal effects from the pooled sample indicate that
while education levels may be statistically significant and
negatively associated with the probability of consuming
alcohol, its effect was modest as an additional year of
education possessed by the household head decreased the
probability of drinking by 0.4% (Table 2). Furthermore,
households with a college-educated head were 1.7% less
likely to partake in smoking activities than less-educated
households.
The results from the pooled sample also indicate that
income was statistically significant and the probability of
purchasing alcohol increased by 3.0% for each additional
RM1000 in household income. To further examine the
marginal effects of income, we found that an increase in
income from the first quartile (RM1155) to the median
income (RM1991) increased the probability of purchase by
2.1%; whereas, an increase from the median income to the
third quartile (RM3301) increased the probability by 3.6%.
On the other hand, the probability of purchasing alcohol
decreased by 1.3% for every additional family member in
the household.
Echoing the results of Gius (2005), Nayga (1996) and
Yen and Jensen (1996), ethnicity is an important factor in
alcohol purchasing decisions and expenditure levels in
Malaysia. In fact, Indian households and households of
J Fam Econ Iss (2009) 30:149–159 155

Table 2 Marginal effects of explanatory variables: pooled sample

Variable Probability Conditional level Unconditional level

Continuous explanatory variables

Educ -0.004*** (0.001) -1.108 (0.739) -0.488** (0.156)
12–16 years -0.017*** (0.004) -4.359
(2.615) -1.765*** (0.436)
Income 910-3 0.030*** (0.003) 15.593*** (1.545) 4.646*** (0.382)
Q1–Q2 0.021*** (0.002) 9.793*** (0.761) 2.458*** (0.179)
Q2–Q3 0.036*** (0.003) 18.420*** (0.761) 5.469*** (0.470)
Hhsz -0.013*** (0.003) -4.283*** (1.319) -1.597*** (0.286)
Age 710 0.014 (0.019) 6.293 (8.304) 2.007 (2.639)
Binary explanatory variables
Indian -0.056*** (0.015) -3.939 (7.647) -4.608* (1.724)
Other -0.096*** (0.012) 12.353 (7.775) -5.256*** (1.505)
White-collar -0.023
(0.013) -4.220 (7.299) -2.358 (1.587)
Urban -0.039* (0.014) 0.289 (8.008) -2.860 (1.955)
Male 0.107*** (0.011) -4.363 (10.484) 7.422*** (1.422)
Age 15–30 -10.459 (8.831) -1.822 (1.527)
Age C57 12.651 (9.165) 2.203 (1.609)
Note: Asymptotic standard errors in parentheses. The quartiles of income are Q1 = RM1155, Q2 = RM1991 and Q3 = RM3301
* p \ 0.05; ** p \ 0.01; *** p \ 0.001;
p \ 0.1

other races were 5.6% and 9.6%, respectively, less likely to
purchase alcohol than Chinese households. In terms of
expenditures, Indian (RM4.61) and other race (RM5.26)
households spent less on alcohol compared to Chinese
households.
Households with white-collar occupations were 2.3%
less likely to purchase alcoholic beverages compared to
their blue-collar counterparts; urban households had a 3.9%
lower probability of spending on alcohol compared to their
rural cohorts; and the probability of alcohol purchase was
10.7% higher for households headed by males compared to
those with female household heads.
While education was not statistically significant on the
expenditures of current alcohol consumers, its impact is
evident on the unconditional levels of drinking as an
additional year of education significantly decreased
unconditional expenditure levels by RM0.49. However,
college-educated households spent RM4.36 and RM1.77
less in conditional and unconditional alcohol expenditures,
respectively, than other households. These statistically
significant effects of education, while not particularly
large, are nevertheless worth mentioning in terms of its
direction of impact.
Each additional RM1000 household income increased
the conditional level of alcohol spending by RM15.59 and
the unconditional level by RM4.65. As income increased
from the first quartile to the median, the conditional and
unconditional expenditures went up by RM9.79 and
RM2.46, respectively. On the other hand, income changes
from the median to the 75% income quartile raised
conditional and unconditional expenditures by RM18.42
and RM5.47, respectively.
An additional household member decreased conditional
and unconditional alcohol expenditures by RM4.28 and
RM1.60, respectively. Interestingly, age did not have any
statistical impact on either the probability or levels of
alcohol expenditure.
In terms of unconditional expenditures, households
headed by males spent RM7.42 more than households with
female household heads. Finally, occupation type, location
of residence, and age groups did not have any statistically
significant effects on the expenditure levels of alcohol.
By Ethnic Groups
To further examine the marginal effects of the explanatory
variables on household purchase decisions and expendi-
tures on alcohol, the sample was segregated into the three
other ethnic groups in Malaysia (Chinese, Indian, others)
besides the Malay majority. Contrary to the findings by
Harris et al. (2006), Nayga (1996) and Zhao and Harris
(2004), higher educated Chinese were less likely to pur-
chase or spend on alcohol as indicated by the negative
impact of education on the probability (0.9%) and both
conditional (RM2.52) and unconditional (RM1.20) expen-
diture levels of drinking (Table 3). The effects of education
on Indian and other races were not statistically significant.
On the other hand, Chinese household heads with college
education (16 years) were 3.3% less likely to partake in
smoking activities compared to high school graduates

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Table 3 Marginal effects of explanatory variables by ethnic groups

123
Variable Chinese Indian Others
Probability Conditional Unconditional Probability Conditional Unconditional Probability Conditional Unconditional
level level level level level level

Continuous explanatory variables

Educ -0.009*** -2.521* -1.201*** 0.002 -0.857 0.021 -0.001 2.076 0.154
(0.002) (0.935) (0.263) (0.004) (1.741) (0.357) (0.002) (1.538) (0.212)
12–16 years -0.033*** -8.828*** -3.539*** 0.011 -3.388 0.057 -0.004 11.697 0.935
(0.006) (2.261) (0.505) (0.018) (6.347) (1.584) (0.007) (10.817) (1.507)
Income 910-3 0.039*** 17.627*** 6.591*** 0.009 7.898 1.658
0.022** 12.594** 2.778**
(0.005) (2.034) (0.632) (0.010) (5.140) (0.996) (.004) (2.521) (0.480)
Q1–Q2 0.034*** 13.243*** 4.156*** 0.008 5.612
1.239* 0.011*** 6.418*** 1.326***
(0.003) (1.208) (0.356) (0.007) (3.202) (0.596) (0.002) (1.085) (0.215)
Q2–Q3 0.061*** 27.786*** 10.710*** 0.014 9.246
2.257
0.021*** 12.055*** 2.841***
(0.007) (3.381) (1.168) (0.010) (5.753) (1.178) (0.004) (2.293) (0.503)
Hhsz -0.019** -5.088* -2.416*** -0.017* -6.498* -1.919** -0.007* -2.893 –0.766**
(0.004) (1.869) (0.532) (0.007) (3.278) (0.674) (0.003) (2.148) (0.285)
Age 7 10 -0.026 -10.743 -4.177 0.040 8.721 3.607 0.057
34.241 7.364
(0.027) (11.158) (4.345) (0.058) (15.144) (5.359) (0.031) (25.151) (4.563)
Discrete explanatory variables
White-collar -0.038* -4.324 -3.711 -0.054
24.353 -0.182 0.017 -19.436 -1.233
(0.019) (8.521) (2.355) (0.032) (23.644) (4.026) (0.023) (14.299) (2.390)
Urban 0.003 -6.317 -1.152 -0.092* -25.463 -11.200
-0.057*** 22.462 -1.168
(0.023) (12.332) (3.351) (0.042) (20.036) (5.836) (0.017) (13.938) (2.136)
Male 0.147*** -7.937 9.808*** 0.097*** -2.595 5.739* 0.058*** -4.550 3.933
(0.017) (12.867) (2.082) (0.030) (19.658) (2.833) (0.017) (28.109) (2.557)
Age 15–30 -3.343 -0.743 14.078 2.171 -34.430** -4.090**
(12.688) (2.814) (26.163) (4.069) (12.051) (1.396)
Age C57 12.677 2.817 6.552 1.011 24.088 2.861
(10.317) (2.306) (23.778) (3.686) (35.640) (4.290)
Note: Robust standard errors in parentheses. Quartiles of income (Q1, Q2, Q3) are RM1746, RM2805 and RM4538 for the Chinese; RM1523, RM2354 and RM3616 for the Indian; RM845,
RM1405 and RM2348 for the others
* p \ 0.05; ** p \ 0.01; *** p \ 0.001;
p \ 0.1
J Fam Econ Iss (2009) 30:149–159
J Fam Econ Iss (2009) 30:149–159
(12 years). Similarly, Chinese household heads with col-
lege education spent RM8.83 and RM3.54 lower
conditional and unconditional alcohol expenditures,
respectively, than those with only high school education.
The marginal effects of income by ethnic groups suggest
that income is statistically significant and positively asso-
ciated with the probability of purchasing alcohol for
Chinese and those of other races only. However, the
magnitude was fairly small, with each additional RM1000
in household income increasing the probability of pur-
chasing alcohol by 3.9% and 2.2% among Chinese and
other race households, respectively. The probability of
purchase for Chinese households increased by 3.4% when
income increased from the first quartile (RM1746) to the
median (RM2805), and by 6.1% from the median to the
third quartile (RM4538). Among those of other descent,
this probability was augmented by 1.1% for income
changes from the first quartile (RM845) to the median
(RM1405), followed by a 2.1% increase from the median
to the third quartile (RM2348).
Conforming to Nayga (1996) and a priori expectations,
household size was inversely related to the probability of
purchasing alcohol among households of all races. In par-
ticular, each additional household member decreased the
likelihood to purchase alcohol by 1.9%, 1.7% and 0.7% for
Chinese, Indian and other ethnic households, respectively.
This implies that Malaysians generally view alcohol as a
non-necessity given that when household size increased,
the likelihood to consume and its magnitude of expendi-
tures on alcohol declined.
Having a white-collar occupation lowered the proba-
bility of purchasing alcoholic beverages among Chinese
(3.8%) and Indian (5.4%) households. Residing in an urban
locality significantly lowered the probability of alcohol
purchase for only Indians (9.2%) and those of other races
(5.7%) compared to their rural counterparts. Meanwhile,
Chinese (14.7%), Indian (9.7%) and other race (5.8%)
households led by males were more likely to purchase
alcohol than those with female household heads.
The results also suggest that among alcohol consuming
households, an increase of RM1000 in income leads to
statistically significant and higher expenditure levels for
Chinese (RM17.63) and other race households (RM12.59).
Income levels were also statistically significant in deter-
mining unconditional levels of alcohol expenditures by
Chinese (RM6.59) and other (RM2.78) race households.
Among Chinese households, conditional and unconditional
expenditures went up by RM13.24 and RM4.16, respec-
tively, as income changed from the first quartile to the
median. This was followed by increases in conditional
(RM27.79) and unconditional (RM10.71) alcohol expen-
ditures from the median to the 75% income quartile. For
those of other descent, changes from the 25% income
157
quartile to the median quartile elicited a RM6.42 and
RM1.33 increase in conditional and unconditional expen-
ditures respectively. At the same time, conditional and
unconditional alcohol expenditures went up by RM12.06
and RM2.84, respectively, in response to income changes
from the median to the 75% quartile.
For every additional family member, Chinese house-
holds decreased their conditional (RM5.09) and
unconditional (RM2.42) expenditures, Indian households
decreased their conditional (RM6.50) and unconditional
(RM1.92), and those of other races lowered their uncon-
ditional expenditures (RM0.77) accordingly. Further, urban
Indian households had lower unconditional (RM11.20)
expenditures compared to their rural cohorts.
Finally, while having a male as opposed to a female
household head increased the overall alcohol expenditure
levels of Chinese (RM9.81) and Indian (RM5.74) ethnic
groups, those households of other races in the younger age
group (between 15 and 30 years) had lower conditional
(RM34.43) and unconditional (RM4.09) levels of alcohol
expenditures compared to their middle-age (between 31
and 56 years) counterparts.
Concluding Remarks
While previous studies on the trend of alcohol consumption
exist in Malaysia, no other study evaluated the socio-
demographic factors influencing alcohol purchase deci-
sions and expenditures. Using Heckman’s sample selection
models, our results suggest that household socio-demo-
graphics are important determinants of alcohol purchase
decisions and expenditures, and the effects can differ
across ethnic groups in Malaysia. Specifically, while edu-
cation had a significant but modest impact in reducing the
probability of alcohol purchase decisions and expenditure
levels among Chinese households, its effect was not evi-
dent for Indians and those of other races. In addition, while
income had a statistically significant role in raising the
probability and expenditure levels of alcohol consumption
for those of Chinese and other descents only, household
size was negatively related to the probability and levels of
alcohol expenditure for all ethnicities.
Similar to the results in other countries, households
headed by males were more likely to purchase alcohol and
also spent more conditional on purchase, especially among
Chinese and Indian households. At the same time, urban
Indian households were less likely to purchase alcohol and
also spent less in alcohol compared to rural Indian house-
holds. Last, younger households (age 15–30) of other races
spent significantly less in both conditional and uncondi-
tional alcohol expenditures compared to their middle-age
(age 31–56) cohorts.
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158
Finally, although this study represents one of the first
attempts at definitively and econometrically determining
the socio-demographic factors affecting the likelihood of
purchases and expenditure patterns on alcohol consumption
among Malaysian households, several limitations were
encountered due to the secondary nature of the data. First,
the only available information was the value of total
monthly household expenditures. Therefore, the dependent
variable was assumed to implicitly capture the interaction
between prices and demand quantities in the alcohol mar-
ket. Second, the study would have drawn up a more
comprehensive picture of the socio-demographic effects if
the following additional information were readily avail-
able: (a) marital status, (b) number of working adults, (c)
number of children in the household and (d) their ages, (e)
working hours, (f) health status, and (g) whether the
respondent was a social or a compulsive drinker. Hence,
with data availability (especially on alcohol price or excise
taxes), future studies should replicate our analysis using
individual alcohol expenditures or consumption data and
also with longitudinal panel data to assess the robustness of
our findings. While not the focus of the current study,
longitudinal studies could also focus on the analysis and
assessment of the role of addiction in drinking and the
effectiveness of anti-drinking laws that have been imple-
mented in Malaysia, as well as the specific externalities
that would further justify making alcohol consumption a
public welfare and policy issue.
Acknowledgement Research support from the Universiti Sains
Malaysia short-term grant (304/PSOSIAL/637038) is acknowledged.
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Author Biographies
Andrew K. G. Tan is Senior Lecturer of Economics at Universiti
Sains Malaysia. Besides teaching Microeconomics and Environmen-
tal Economics, he conducts research in the areas of consumer-
household demand, health economics and non-market goods.
Steven T. Yen is Associate Professor of Agricultural Economics at
the University of Tennessee, Knoxville. Professor Yen has published
in consumer demand analysis and applied micro-econometrics. His
current research areas include addressing the effects of government
programs on children’s welfare and the economics of food demand,
nutrition, health, and food safety.
Rodolfo M. Nayga, Jr. is Professor and Tyson Chair in Food Policy
Economics in the Department of Agricultural Economics and Agri-
business at the University of Arkansas. Prior to joining the University
of Arkansas, he was a professor at Texas A&M University and Rut-
gers University. His research interests include nutrition and health
economics, food policy, and behavioral economics.
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