Brewing up entrepreneurship: government intervention in beer

Abstract

Purpose While previous studies have looked at the negative consequences of beer drinking often as a prelude to discussing benefits of laws that curtail consumption, the purpose of this paper is to understand the downside of such regulations insofar as reducing entrepreneurial activity in the brewing industry. Design/methodology/approach Using a unique data set from the Brewers’ Association that contains information on the number and type of brewery in each county, this study explores the relationship between the number of breweries and regulations targeted at the brewing industry. Zero-inflated negative binomial regressions are used to determine the relationship between the number of microbreweries and brewpubs per county and state beer taxes, self-distribution legislation, and on-premises sales. Findings The authors find that allowing breweries to sell beers on-premises as well as allowing for breweries to self-distribute have statistically significant relationships with the number of microbreweries, brewpubs, and breweries. The authors do not find an economically significant relationship between state excise taxes and the number of breweries of any type. Originality/value Results suggest that whatever public health benefits are brought about by alcohol laws, they are not a free lunch, as they may hinder entrepreneurial development.