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Tobacco and Alcohol: Complements or Substitutes? A Structural Model Approach

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  • Tauchmann, Harald

    () (RWI)

  • Göhlmann, Silja

    () (RWI)

  • Requate, Till

    () (University of Kiel)

  • Schmidt, Christoph M.

    () (RWI)

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-smoking 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 moderate reduction in alcohol consumption. It is shown theoretically 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.

Suggested Citation

  • Tauchmann, Harald & Göhlmann, Silja & Requate, Till & Schmidt, Christoph M., 2008. "Tobacco and Alcohol: Complements or Substitutes? A Structural Model Approach," IZA Discussion Papers 3412, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3412
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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. Michael Kvasnicka & Harald Tauchmann, 2010. "Krankenhaus Rating Report 2010 – Licht und Schatten – Executive Summary," RWI Materialien, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 21, 04.
    3. George Wehby & Allen Wilcox & Rolv Lie, 2013. "The impact of cigarette quitting during pregnancy on other prenatal health behaviors," Review of Economics of the Household, Springer, vol. 11(2), pages 211-233, June.
    4. Kvasnicka, Michael & Tauchmann, Harald, 2010. "Eine Befragung von Gastronomiebetrieben zur Einführung von Rauchverboten: Deskriptive Ergebnisse," RWI Materialien 58, RWI - Leibniz-Institut für Wirtschaftsforschung.
    5. repec:zbw:rwimat:058 is not listed on IDEAS
    6. Silja Göhlmann & Christoph M. Schmidt & Harald Tauchmann, 2010. "Smoking initiation in Germany: the role of intergenerational transmission," Health Economics, John Wiley & Sons, Ltd., vol. 19(2), pages 227-242.

    More about this item

    Keywords

    insufficient price-variation; instrumental variables approach; complements or substitutes; tobacco and alcohol; interdependence in consumption;

    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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