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Tobacco and alcohol: complements or substitutes?

Author

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  • Harald Tauchmann

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  • 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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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Palali, Ali, 2015. "Early Smoking, Education, and Labor Market Performance," Discussion Paper 2015-033, Tilburg University, Center for Economic Research.
    2. 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 and Journal Articles 16-265, W.E. Upjohn Institute for Employment Research.
    3. 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.

    More about this item

    Keywords

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

    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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