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Title:Tobacco and alcohol: complements or substitutes? : a statistical Guinea Pig approach PDF Logo
Authors:Requate, Till
Göhlmann, Silja
Tauchmann, Harald
Schmidt, Christoph M.
Issue Date:2006
Series/Report no.:Economics working paper / Christian-Albrechts-Universität Kiel, Department of Economics 2006,18
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-drug 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 reduction in alcohol consumption, too. It is shown theoretically that this implies that alcohol and tobacco are complements. Hence, we conclude that successful antismoking policies will not result in the unintended side-effect of an increased (ab)use of alcohol.
Subjects:interdependence in consumption
tobacco and alcohol
instrumental variables approach
JEL:C31
I12
D12
Document Type:Working Paper
Appears in Collections:Economics Working Papers, Department of Economics, CAU Kiel

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