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Addiction and interaction between alcohol and tobacco consumption

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Abstract

This paper adopts a multi-commodity habit formation model to study whether unhealthy behaviors are related, i.e. whether there are contemporaneous and inter-temporal complementarities between alcohol and tobacco consumptions in Italy. To this aim time series data of per-capita expenditures and prices during the period 1960 to 2002 are used. 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 thus suggesting complementarity. A “double dividend” could then be exploited, because public policy needs to tackle the consumption of only one good to control the demand of both. These results show that the optimal strategy for maximizing public revenues would be to raise alcohol taxation more than tobacco taxation. Finally, past consumption of one addictive good does not significantly reinforce current consumption of the other.

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Authors and Affiliations

  1. Department of Economic Policy, Finance and Development, University of Siena, Piazza San Francesco, 7 53100, Siena (I)

    Pierpaolo Pierani

  2. Department of Economics, University of Siena, Piazza San Francesco, 7 53100, Siena (I)

    Silvia Tiezzi

Authors
  1. Pierpaolo Pierani
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  2. Silvia Tiezzi
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Correspondence to Silvia Tiezzi.

Additional information

We thank participants to the Annual Conference of the European Society for Population Economics, Verona June 2006; the 61st European Meeting of the Econometric Society, Vienna August 2006, and participants of the conference “Individual and Collective Choices in Health Protection”, Genoa November 2005 for helpful comments. We would also like to thank, without implicating, Pier Luigi Rizzi and two anonymous referees for helpful comments. Financial support from the University of Siena, PAR grant (Atheneum Research Grant), is gratefully acknowledged.

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Pierani, P., Tiezzi, S. Addiction and interaction between alcohol and tobacco consumption. Empir Econ 37, 1–23 (2009). https://doi.org/10.1007/s00181-008-0220-3

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  • DOI: https://doi.org/10.1007/s00181-008-0220-3

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