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Addiction and interaction between alcohol and tobacco consumption

Author

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  • Pierpaolo Pierani
  • Silvia Tiezzi
Abstract
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
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Suggested Citation

  • Pierpaolo Pierani & Silvia Tiezzi, 2009. "Addiction and interaction between alcohol and tobacco consumption," Empirical Economics, Springer, vol. 37(1), pages 1-23, September.
    • Handle: RePEc:spr:empeco:v:37:y:2009:i:1:p:1-23
    DOI: 10.1007/s00181-008-0220-3
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    Cited by:

    1. Michelle Sovinsky & Liana Jacobi & Alessandra Allocca & Tao Sun, 2023. "More than Joints: Multi-Substance Use, Choice Limitations, and Policy Implications," Rationality and Competition Discussion Paper Series 487, CRC TRR 190 Rationality and Competition.
    2. R. Duarte & J. Escario & J. Molina, 2014. "Are estimated peer effects on smoking robust? Evidence from adolescent students in Spain," Empirical Economics, Springer, vol. 46(3), pages 1167-1179, May.
    3. Andrew K.G. Tan & Steven T. Yen & Abdul Rahman Hasan, 2016. "Cigarette and Alcohol Expenditures in Malaysia: Implications for Anti‐Smoking and Drinking Policies," Asian Economic Journal, East Asian Economic Association, vol. 30(4), pages 401-421, December.
    4. Guoting Zhang & Jiajia Zhan & Hongqiao Fu, 2022. "Trends in Smoking Prevalence and Intensity between 2010 and 2018: Implications for Tobacco Control in China," IJERPH, MDPI, vol. 19(2), pages 1-16, January.
    5. Koksal, Aycan & Wohlgenant, Michael, 2013. "Pseudo Panel Data Estimation Technique and Rational Addiction Model: An Analysis of Tobacco, Alcohol and Coffee Demands," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150457, Agricultural and Applied Economics Association.
    6. David Aristei & Luca Pieroni, 2010. "Habits, Complementarities and Heterogeneity in Alcohol and Tobacco Demand: A Multivariate Dynamic Model," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(4), pages 428-457, August.
    7. Concetta CASTIGLIONE & Ladislava GROCHOVÁ & Davide INFANTE & Janna SMIRNOVA, 2011. "The demand for beer in presence of past consumption and advertising in the Czech Republic," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 57(12), pages 589-599.
    8. Alan Brennan & Petra Meier & Robin Purshouse & Rachid Rafia & Yang Meng & Daniel Hill-Macmanus, 2016. "Developing policy analytics for public health strategy and decisions—the Sheffield alcohol policy model framework," Annals of Operations Research, Springer, vol. 236(1), pages 149-176, January.
    9. Michelle Sovinsky & Liana Jacobi & Alessandra Allocca & Tao Sun, 2024. "More than Joints: Multi-Substance Use, Choice Limitations, and Policy Implications," CRC TR 224 Discussion Paper Series crctr224_2024_501, University of Bonn and University of Mannheim, Germany.
    10. Carlo Ciccarelli & Pierpaolo Pierani & Silvia Tiezzi, 2014. "Secular trends in tobacco consumption: the case of Italy, 1871-2010," Department of Economics University of Siena 700, Department of Economics, University of Siena.
    11. Ida, Takanori, 2010. "Anomaly, impulsivity, and addiction," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(2), pages 194-203, April.
    12. Fu, Shengfei & Florkowski, Wojciech, 2016. "Polish Household Consumption of Tobacco and Alcohol: A Censored System," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229795, Southern Agricultural Economics Association.
    13. Aycan Koksal & Michael K. Wohlgenant, 2016. "How do smoking bans in restaurants affect restaurant and at-home alcohol consumption?," Empirical Economics, Springer, vol. 50(4), pages 1193-1213, June.
    14. Harald Tauchmann & Silja Lenz & Till Requate & Christoph Schmidt, 2013. "Tobacco and alcohol: complements or substitutes?," Empirical Economics, Springer, vol. 45(1), pages 539-566, August.
    15. Adem Aksoy & Abdulbaki Bilgic & Steven T. Yen & Faruk Urak, 2019. "Determinants of Household Alcohol and Tobacco Expenditures in Turkey," Journal of Family and Economic Issues, Springer, vol. 40(4), pages 609-622, December.
    16. Benjamin Ukert, 2017. "The short- and long-run effects of smoking cessation on alcohol consumption," International Journal of Health Economics and Management, Springer, vol. 17(4), pages 495-519, December.
    17. Adrian R. Fleissig, 2020. "Impact of Casino Gambling and Lotteries on Demand for Other ‘Sin’ Goods," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(3), pages 327-338, September.
    18. Alan Brennan & Petra Meier & Robin Purshouse & Rachid Rafia & Yang Meng & Daniel Hill-Macmanus, 2016. "Developing policy analytics for public health strategy and decisions—the Sheffield alcohol policy model framework," Annals of Operations Research, Springer, vol. 236(1), pages 149-176, January.
    19. Koksal, Aycan & Wohlgenant, Michael, 2013. "Interdependence of Tobacco and Alcohol Consumption: A Natural Experiment Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150459, Agricultural and Applied Economics Association.
    20. Goel, Rajeev K. & Payne, James E. & Saunoris, James W., 2016. "Spillovers from the beer market to U.S. cigarette demand," Economic Modelling, Elsevier, vol. 55(C), pages 292-297.
    21. Zhang, Zili & Hu, Xiao & Zhang, Xuanxuan & Zheng, Rong, 2024. "Do tougher drinking policies affect men's smoking behavior - Evidence from China," Social Science & Medicine, Elsevier, vol. 348(C).
    22. Jakub Čihák, 2020. "The effect of economic conditions on alcohol consumption," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 67(4), pages 481-497, December.
    23. Jakub Čihák, 0. "The effect of economic conditions on alcohol consumption," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 0, pages 1-17.
    24. Pu, Cheng-yun & Lan, Virginia & Chou, Yiing-Jenq & Lan, Chung-fu, 2008. "The crowding-out effects of tobacco and alcohol where expenditure shares are low: Analyzing expenditure data for Taiwan," Social Science & Medicine, Elsevier, vol. 66(9), pages 1979-1989, May.
    25. Abdulbaki Bilgic & Wojciech Florkowski & Cuma Akbay, 2010. "Demand for cigarettes in Turkey: an application of count data models," Empirical Economics, Springer, vol. 39(3), pages 733-765, December.

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    More about this item

    Keywords

    Multiple addictions; Sin goods; GMM estimator; D12; C32;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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