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Tobacco and Alcohol: Complements or Substitutes? - A Statistical Guinea Pig Approach

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Author Info
Harald Tauchmann ()
Silja Göhlmann ()
Till Requate
Chistoph M. Schmidt ()

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Abstract

The question of whether two drugs – namely alcohol and tobacco – are used as complements or substitutes is of crucial interest if side-effects of anti-drug policies are considered. 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 often is 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 to German survey data. Our estimation results suggest that a reduction in tobacco consumption results in a reduction in alcohol consumption, too. It is shown theoretically that this implies that alcohol and tobacco are complements. Hence, we conclude that successful antismoking policies will not result in the unintended side-effect of an increased (ab)use of alcohol.

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Publisher Info
Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung in its series RWI Discussion Papers with number 0052.

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Length: 37 pages
Date of creation: Nov 2006
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Handle: RePEc:rwi:dpaper:0052

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Related research
Keywords: Interdependence in consumption; tobacco and alcohol; instrumental variables approach;

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Find related papers by JEL classification:
C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
I12 - Health, Education, and Welfare - - Health - - - Health Production

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  1. Mikael Bask & Maria Melkersson, 2004. "Rationally addicted to drinking and smoking?," Applied Economics, Taylor and Francis Journals, vol. 36(4), pages 373-381, March. [Downloadable!] (restricted)
    Other versions:
  2. Nelson, Forrest & Olson, Lawrence, 1978. "Specification and Estimation of a Simultaneous-Equation Model with Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(3), pages 695-709, October. [Downloadable!] (restricted)
  3. Cameron, Lisa & Williams, Jenny, 2001. "Cannabis, Alcohol and Cigarettes: Substitutes or Complements?," The Economic Record, The Economic Society of Australia, vol. 77(236), pages 19-34, March. [Downloadable!] (restricted)
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  10. Su, Shew-Jiuan B & Yen, Steven T, 2000. "A Censored System of Cigarette and Alcohol Consumption," Applied Economics, Taylor and Francis Journals, vol. 32(6), pages 729-37, May. [Downloadable!] (restricted)
  11. Steven T. Yen, 2005. "A Multivariate Sample-Selection Model: Estimating Cigarette and Alcohol Demands with Zero Observations," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 87(2), pages 453-466, 05. [Downloadable!] (restricted)
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  13. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-85, May. [Downloadable!] (restricted)
  14. Murphy, Kevin M & Topel, Robert H, 1985. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 370-79, October.
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  15. Frank J. Chaloupka & Adit Laixuthai, 1997. "Do Youths Substitute Alcohol and Marijuana? Some Econometric Evidence," Eastern Economic Journal, Eastern Economic Association, vol. 23(3), pages 253-276, Summer. [Downloadable!]
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  16. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August. [Downloadable!] (restricted)
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  17. Florkowski, Wojciech J. & McNamara, Kevin T., 1992. "Policy implications of alcohol and tobacco demand in Poland," Journal of Policy Modeling, Elsevier, vol. 14(1), pages 93-98, February. [Downloadable!] (restricted)
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