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Consumer demand for alcoholic beverages and tobacco in Lesotho: A double-hurdle approach

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  • Ramaele Moshoeshoe

Abstract

In this paper, we estimate income elasticities and investigate the determinants of alcohol and tobacco consumption in Lesotho using a Double-Hurdle model on the 2002/03 Lesotho HBS data. The results reveal that both alcohol and tobacco are income inelastic with estimated elasticities of 0.6553 and 0.3561, respectively. Given this, therefore, we argue that differentiated tax hikes, with a relatively higher rate on tobacco, can be more e¤ective both as a consumption deterrent and revenue increasing policy, without much compromise on employment and poverty. Further, we fi…nd evidence that alcoholic beverages and tobacco are complementaries, suggesting the need for a more holistic social policy aimed at curbing consumption of these two goods.

Suggested Citation

  • Ramaele Moshoeshoe, 2012. "Consumer demand for alcoholic beverages and tobacco in Lesotho: A double-hurdle approach," Working Papers 315, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:315
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    File URL: http://www.econrsa.org/node/335
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    More about this item

    Keywords

    Elasticity; Excise Tax; Double-Hurdle; Lesotho;

    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
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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