Factors influencing the consumption of alcohol and tobacco - a review of demand models

There has been a considerable adebate about the need for Government action in relation to the consumption of alcohol and tobacco. The policies discussed include tax changes, advertising controls, health education and regulation of outlets. In order to develop effective policies, an understanding of the factors which influence consumption of these substances is necessary. There have been many attempts to estimate models of consumer demand for alcohol and tobacco. The purpose of this paper is to review several of these studies. Previously estimated models have varied in a number of respects. The differences between previous studies are examined in three sections. Firstly, the underlying demand theory and some aspects of specification employed in the empirical studies are explored. Secondly, the aspects of the main variables and their policy relevance are discussed. Thirdly, some results of recent studies are compared and the statistical procedures that may help to choose between competing models are considered. Thus a framework for further analysis can be devised. FInally some concluding remarks are made on nthe advantages and disadvantages if using demand models for policy formation.