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Tobacco and alcohol: complements or substitutes? : a statistical Guinea Pig approach

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  • Requate, Till
  • Göhlmann, Silja
  • Tauchmann, Harald
  • Schmidt, Christoph M.

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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Bibliographic Info

Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2006,18.

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Date of creation: 2006
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Handle: RePEc:zbw:cauewp:5165

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Keywords: interdependence in consumption; tobacco and alcohol; instrumental variables approach;

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  1. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(1), pages 88-97, January.
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Cited by:
  1. Christoph M. Schmidt & Harald Tauchmann, 2010. "Heterogeneity in the Intergenerational Transmission of Alcohol Consumption – A Quantile Regression Approach," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0186, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Pierpaolo Pierani & Silvia Tiezzi, 2009. "Addiction and interaction between alcohol and tobacco consumption," Empirical Economics, Springer, Springer, vol. 37(1), pages 1-23, September.

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