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Is it possible to reduce tobacco consumption via alcohol taxation?

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  • Sergio Jimenez
  • José M. Labeaga

Abstract

Recent studies with Spanish data suggest that indirect taxation is a potential instrument to reduce tobacco consumption but the magnitude of the estimated price elasticity limits the effectiveness of the taxes. However, if the separability restriction does not hold between tobacco and other goods, the results obtained could be misleading. This shortcoming of previous analyses leads us to formulate a demand system with alcohol, tobacco and other goods so as to estimate and test complementary effects and to assess the possibility for reducing consumption by indirect taxation of complementary commodities. We use the Spanish Family Expenditure Survey to carry out a cross‐section study which allows us to estimate demand models under different assumptions about the nature of zero expenditures and to test the effectiveness of indirect taxation. The findings tend to support our initial suspicions about the inadequacy of imposing separability and point out the importance of alcohol taxation to reduce tobacco consumption. However, given the structure of the data used, these results should be viewed with caution and must be confirmed by additional evidence.

Suggested Citation

  • Sergio Jimenez & José M. Labeaga, 1994. "Is it possible to reduce tobacco consumption via alcohol taxation?," Health Economics, John Wiley & Sons, Ltd., vol. 3(4), pages 231-241, July.
  • Handle: RePEc:wly:hlthec:v:3:y:1994:i:4:p:231-241
    DOI: 10.1002/hec.4730030405
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    References listed on IDEAS

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    Cited by:

    1. Angel López Nicolás, 2002. "How important are tobacco prices in the propensity to start and quit smoking? An analysis of smoking histories from the Spanish National Health Survey," Health Economics, John Wiley & Sons, Ltd., vol. 11(6), pages 521-535, September.
    2. David Aristei & Luca Pieroni, 2010. "Habits, Complementarities and Heterogeneity in Alcohol and Tobacco Demand: A Multivariate Dynamic Model," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(4), pages 428-457, August.
    3. Tauchmann, Harald & Göhlmann, Silja & Requate, Till & Schmidt, Christoph M., 2006. "Tobacco and Alcohol: Complements or Substitutes? - A Statistical Guinea Pig Approach," RWI Discussion Papers 52, RWI - Leibniz-Institut für Wirtschaftsforschung.
    4. Tauchmann, Harald & Göhlmann, Silja & Requate, Till & Schmidt, Christoph M., 2007. "Tobacco and Alcohol: Complements or Substitutes? – A Structural Model Approach," Ruhr Economic Papers 34, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    5. 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.
    6. repec:zbw:rwidps:0052 is not listed on IDEAS
    7. Ferrando-Latorre, Sandra, 2017. "Risky consumption and intergenerational mobility: a research program in a family context," MPRA Paper 79777, University Library of Munich, Germany.
    8. Campaña, Juan Carlos, 2017. "¿Pueden llegar a ser adictivos los comportamientos juveniles sedentarios en el hogar? Un programa de investigación con respuestas conceptuales y evidencia empírica [Can sedentary youth behaviors be," MPRA Paper 81401, University Library of Munich, Germany.
    9. Göhlmann, Silja & Schmidt, Christoph M., 2008. "Smoking in Germany: Stylized Facts, Behavioral Models, and Health Policy," Ruhr Economic Papers 64, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    10. Gabriel A. Picone & Frank Sloan & Justin G. Trogdon, 2004. "The effect of the tobacco settlement and smoking bans on alcohol consumption," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 1063-1080, October.
    11. repec:zbw:rwirep:0064 is not listed on IDEAS
    12. Silja Göhlmann & Christoph M. Schmidt, 2008. "Smoking in Germany: Stylized Facts, Behavioral Models, and Health Policy," Ruhr Economic Papers 0064, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    13. C. Vilaplana & José M. Labeaga & S. Jiménez-Martín, 2006. "Further evidence about alcohol consumption and the business cycle," Working Papers 2006-06, FEDEA.
    14. Ferrando, Sandra, 2017. "Risky consumption among adolescents: A survey for Spain," MPRA Paper 79465, University Library of Munich, Germany.
    15. Harald Tauchmann & Silja Göhlmann & Till Requate & Chistoph M. Schmidt, 2006. "Tobacco and Alcohol: Complements or Substitutes? - A Statistical Guinea Pig Approach," RWI Discussion Papers 0052, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.

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