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Tobacco and Alcohol: Complements or Substitutes? – A Structural Model Approach

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  • Harald Tauchmann

    ()

  • Silja Göhlmann

    ()

  • Till Requate
  • Christoph M. Schmidt

    ()

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-smoking 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 moderate reduction in alcohol consumption. It is shown theoretically 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.

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Bibliographic Info

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0034.

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Length: 40 pages
Date of creation: Dec 2007
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Handle: RePEc:rwi:repape:0034

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Keywords: Complements or substitutes; interdependence in consumption; tobacco and alcohol; insufficient price-variation; instrumental variables approach;

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References

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Cited by:
  1. Silja Göhlmann & Christoph M. Schmidt & Harald Tauchmann, 2010. "Smoking initiation in Germany: the role of intergenerational transmission," Health Economics, John Wiley & Sons, Ltd., vol. 19(2), pages 227-242.
  2. George Wehby & Allen Wilcox & Rolv Lie, 2013. "The impact of cigarette quitting during pregnancy on other prenatal health behaviors," Review of Economics of the Household, Springer, vol. 11(2), pages 211-233, June.
  3. Michael Kvasnicka & Harald Tauchmann, 2010. "Krankenhaus Rating Report 2010 – Licht und Schatten – Executive Summary," RWI Materialien, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 21, 04.

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