Consumer demand for alcoholic beverages and tobacco in Lesotho: A double-hurdle approach
AbstractIn this paper, we estimate income elasticities and investigate the determinants of alcohol and tobacco consumption in Lesotho using a Double-Hurdle model on the 2002/03 Lesotho HBS data. The results reveal that both alcohol and tobacco are income inelastic with estimated elasticities of 0.6553 and 0.3561, respectively. Given this, therefore, we argue that differentiated tax hikes, with a relatively higher rate on tobacco, can be more eÂ¤ective both as a consumption deterrent and revenue increasing policy, without much compromise on employment and poverty. Further, we fiÂ…nd evidence that alcoholic beverages and tobacco are complementaries, suggesting the need for a more holistic social policy aimed at curbing consumption of these two goods.
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Bibliographic InfoPaper provided by Economic Research Southern Africa in its series Working Papers with number 315.
Length: 20 pages
Date of creation: 2012
Date of revision:
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Elasticity; Excise Tax; Double-Hurdle; Lesotho;
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; Quantile Regressions; Social Interaction Models
- C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
- C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
This paper has been announced in the following NEP Reports:
- NEP-AFR-2012-09-22 (Africa)
- NEP-ALL-2012-09-22 (All new papers)
- NEP-PBE-2012-09-22 (Public Economics)
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