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Tobacco and alcohol: complements or substitutes?

Author

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  • Harald Tauchmann
  • Silja Lenz
  • Till Requate
  • Christoph Schmidt

Abstract

The question of whether alcohol and tobacco are consumed as complements or substitutes is crucial for determining the side-effects of anti-smoking policies. Numerous papers have empirically addressed this issue by estimating demand systems for alcohol and tobacco, and subsequently calculating cross-price effects. However, this traditional approach is often seriously hampered by insufficient price variation observed in survey data. We, therefore, suggest an alternative instrumental variables approach that statistically mimics an experimental study and does not rely on prices as explanatory variables. This approach is applied by means of German survey data. Our estimation results suggest that a reduction in tobacco consumption results in a moderate reduction in alcohol consumption. It is demonstrated that this implies that alcohol and tobacco are complements. Hence, we conclude that successful anti-smoking policies will not result in the unintended side-effect of an increased (ab)use of alcohol. Copyright Springer-Verlag 2013

Suggested Citation

  • Harald Tauchmann & Silja Lenz & Till Requate & Christoph Schmidt, 2013. "Tobacco and alcohol: complements or substitutes?," Empirical Economics, Springer, vol. 45(1), pages 539-566, August.
    • Handle: RePEc:spr:empeco:v:45:y:2013:i:1:p:539-566
    DOI: 10.1007/s00181-012-0611-3
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    4. Anna Choi & Dhaval Dave & Joseph J. Sabia, 2019. "Smoke Gets in Your Eyes: Medical Marijuana Laws and Tobacco Cigarette Use," American Journal of Health Economics, MIT Press, vol. 5(3), pages 303-333, Summer.
    5. Qing Wang & John A. Rizzo & Hai Fang, 2018. "Changes in Smoking Behaviors following Exposure to Health Shocks in China," IJERPH, MDPI, vol. 15(12), pages 1-11, December.
    6. Ren, Yanjun & Castro Campos, Bente & Loy, Jens-Peter & Wang, Xiaobing, 2020. "Start Smoking Earlier, Smoke More: Does Education Matter?," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304237, Agricultural and Applied Economics Association.
    7. Jason M. Fletcher, 2019. "Estimating Causal Effects Of Alcohol Access And Use On A Broad Set Of Risky Behaviors: Regression Discontinuity Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 37(3), pages 427-448, July.
    8. Palali, Ali, 2015. "Early Smoking, Education, and Labor Market Performance," Discussion Paper 2015-033, Tilburg University, Center for Economic Research.
    9. Jérôme Ronchetti & Anthony Terriau, 2021. "Unemployment and Risky Behaviours: The Effect of Job Loss on Alcohol and Tobacco Consumption," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 522-523, pages 23-41.
    10. Tanja Laković & Ana Mugoša & Mirjana Čizmović & Gordana Radojević, 2019. "Impact of Taxation Policy on Household Spirit Consumption and Public-Finance Sustainability," Sustainability, MDPI, vol. 11(20), pages 1-15, October.
    11. Anna Choi & Dhaval Dave & Joseph J. Sabia, 2016. "Smoke Gets in Your Eyes: Medical Marijuana Laws and Tobacco Use," NBER Working Papers 22554, National Bureau of Economic Research, Inc.
    12. Pryce, Robert, 2019. "The effect of the United Kingdom smoking ban on alcohol spending: Evidence from the Living Costs and Food Survey," Health Policy, Elsevier, vol. 123(10), pages 936-940.
    13. Yanjun Ren & Bente Castro Campos & Jens-Peter Loy, 2020. "Drink and smoke; drink or smoke? The interdependence between alcohol and cigarette consumption for men in China," Empirical Economics, Springer, vol. 58(3), pages 921-955, March.
    14. Mary J. Becker & Thomas J. Zlatoper, 2022. "Relationship Between Smoking and Motor Vehicle Death Rates in the U.S," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 50(1), pages 53-65, June.
    15. Adrian R. Fleissig, 2020. "Impact of Casino Gambling and Lotteries on Demand for Other ‘Sin’ Goods," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(3), pages 327-338, September.
    16. Goel, Rajeev K. & Payne, James E. & Saunoris, James W., 2016. "Spillovers from the beer market to U.S. cigarette demand," Economic Modelling, Elsevier, vol. 55(C), pages 292-297.
    17. Kevin Callison & Michael F. Pesko, 2016. "The Effect of Mandatory Paid Sick Leave Laws on Labor Market Outcomes, Health Care Utilization, and Health Behaviors," Upjohn Working Papers 16-265, W.E. Upjohn Institute for Employment Research.
    18. Palali, Ali, 2015. "Early Smoking, Education, and Labor Market Performance," Other publications TiSEM b51be057-cb0e-445a-a428-4, Tilburg University, School of Economics and Management.

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    More about this item

    Keywords

    Complements or substitutes; Interdependence in consumption; Tobacco and alcohol; Insufficient price-variation; Instrumental variables approach; C31; D12; I12;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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