Modelling Regional Consumption Patterns in Australia*

In 1977, Stigler and Becker hypothesised that ‘tastes neither change capriciously nor differ importantly between people’. In an interregional context, this implies that irrespective of differences in income and geography, consumers in different regions are similar. Studies conducted 25 years ago using data for Australian states found support for this hypothesis. However, due to the changing ethnic composition of the population in the states of Australia, differences in consumption patterns between states are emerging. Using recent regional consumption data and demand models, we investigate in this study whether there are regional disparities across the six Australian states, and find that there are in fact differences.