Addiction and the Interaction between Alcohol and Tobacco Consumption
This paper adopts a multi-commodity habit formation model to study whether unhealthy behaviours are related, i.e. whether there are contemporaneous and inter temporal complementarities in Italian consumption of alcohol and tobacco. Own and crossprice elasticities, as well as the income elasticities, are calculated from the parameters of a semi-reduced system estimated on aggregate annual time series for alcohol and tobacco expenditures over the period 1960-2002. Own price elasticities are negative and tobacco appears to be more responsive than alcohol demand, although both responses are less than unity. Cross price elasticities are also negative and asymmetric showing that alcohol and tobacco are complements. Whereby a ”double dividend” could then be exploited, because public policy needs to tackle the consumption of one good only to control the demand of both. The asymmetry in the values of the cross price elasticities coupled with the relative magnitude of the own price responses suggest that the optimal strategy for maximizing public revenues through increases in ”sin” goods excise taxation would be to raise alcohol taxation more than tobacco. Finally, past consumption of one addictive good does not significantly reinforce current consumption of the other addictive good
|Date of creation:||Nov 2005|
|Contact details of provider:|| Postal: Piazza S.Francesco,7 - 53100 Siena|
Web page: http://www.deps.unisi.it/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- repec:bro:econwp:2001-20 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:usi:wpaper:470. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fabrizio Becatti)
If references are entirely missing, you can add them using this form.