Cigarettes and Alcohol: Substitutes or Complements?

Sandra L. Decker and Amy Schwartz

No 7535, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Taxation of cigarettes and alcohol can raise revenue and reduce consumption of goods with negative external effects. Despite medical and psychological evidence linking their consumption, little previous work has investigated the significance of cross-price effects in cigarette and alcohol consumption. We use individual-level data from the Behavioral Risk Factor Surveillance System to investigate cigarette and alcohol consumption in the US, estimating both own and cross-price elasticities. Results suggest significant cross-price effects. Specifically, we find that higher alcohol prices decrease both alcohol consumption and smoking participation (suggesting a complementarity in consumption), while higher cigarette prices tend to decrease smoking participation but increase drinking. The significance of these findings suggests that further work is warranted to better understand the social and economic relationship between cigarette and alcohol consumption.

JEL-codes: H20 (search for similar items in EconPapers)
Date: 2000-02
New Economics Papers: this item is included in nep-hea and nep-ind
Note: EH
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Citations: View citations in EconPapers (65)

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