Do young adults substitute cigarettes for alcohol? Learning from the master settlement agreement
- 273 Downloads
Although real alcohol prices have plummeted over the last two decades, cigarette prices have increased substantially, especially after the Master Settlement Agreement (MSA) in 1998. I study the effect of increases in cigarette prices following the MSA on alcohol consumption among 18- to 24-year olds to determine the economic relationship between cigarettes and alcohol among young adults. I perform analyses at both the conditional mean and quantiles and find that increases in cigarette prices reduce drinking participation among young adults at the extensive margin. However, conditional upon one’s decision to drink, higher cigarette prices increase alcohol consumption. Such a pattern of substitution is concentrated between the 40th and 50th conditional quantiles. The results suggest that caution should be exercised when considering cigarettes and alcohol as complements.
KeywordsCigarettes and alcohol Substitute Complements
I would like to thank David Jacho Chavez, Andrew Francis-Tan, Sara Markowitz, and Hugo Mialon for their extremely helpful comments and suggestions. I am grateful for helpful comments from the seminar participants at the Department of Economics at Emory, the Western Economic Annual Conference, and the Department of Economics at Towson University. I would like to express my sincere gratitude to Anne Hannusch, Otto Lenhart, and Jethro Shrestha for their helpful comments and support. I take full responsibility for any remaining errors and lack of clarity.
- Adda, J., & Cornaglia, F. (2010). The effect of bans and taxes on passive smoking. American Economic Journal: Applied Economics, 2(1), 1–32.Google Scholar
- Cameron, C. A., & Trivedi, P. K. (2009). Microeconometrics with STATA. StataCorp LP: College Station, Texas: Stata Press.Google Scholar
- Carpenter, C., Warman, C., & Postolek, S. (2011). Public-place smoking laws and exposure to envioronmental tobacco smoke (ETS). American Economic Journal: Economic Policy, 3(3), 35–61.Google Scholar
- Decker, S. L., & Schwartz, A. E. (2000). Cigarettes and alcohol: substitutes or complements? (No. w7535) National Bureau of Economic Research. Google Scholar
- LaVallee, R. A., & Yi, H. (2011). Surveillance Report #92: apparent per capita alcohol consumption: National, state, and regional trends, 1977–2009. Bethesda: National Institute on Alcohol Abuse and Alcoholism.Google Scholar
- Lederman, S. (1956). Alcool, alcoolisme, alcoolisation (Vol. 1). Paris: Presses Universitaires de France.Google Scholar
- Little, H. J. (2000). Behavioral mechanisms underlysing the link between smoking and drinking. Alcohol Research and Health, 24, 215–224.Google Scholar
- Markowitz, S. (2000). The price of alcohol, wife abuse, and husband abuse. Southern Economic Journal, 67(2), 279–303.Google Scholar
- Nesson, E. (2015). Heterogeneity in smokers’ responses to tobacco control policies. Health Economics. doi: 10.1002/hec.3289.
- Orzechowski, W., & Walker, R. C. (2011). The tax burden on tobacco, historical compilation. Legacy Tobacco Documents Library, University of California. Google Scholar
- Owyang, M. T., & Vermann, K. E. (2012). Where there’s a smoking ban, there’s still fire. Federal Reserve Bank of St Louis Review, 94(4), 265–286.Google Scholar
- Pernanen, K. (1974). Validity of survey data on alcohol use. Research Advances in Alcohol and Drug Problems, 1, 355–374.Google Scholar
- Polich, M. J., & Orvis, B. R. (1979). Alcohol problems. Rand Corporation.Google Scholar
- USDHHS (U.S. Department of Health and Human Services) (1983) Sixth special report to the U.S. Congress on alcohol and health from the Secretary of Health and Human Services (Public Health Service, Washington. DC)Google Scholar
- USDHHS (U.S. Department of Health and Human Services) (1987) Fifth special report to the U.S. Congress on alcohol and health from the Secretary of Health and Human Services (Public Health Service, Washington, DC)Google Scholar
- Weitkunat, R., Coggins, C. R. E., Sponsiello-Wang, Z., Kallischnigg, G., & Dempsey, R. (2013). Assessment of cigarette smoking in epidemiologic studies. Beiträge zur Tabakforschung/Contributions to Tobacco Research, 25(7), 638–648.Google Scholar
- Wooldridge, J. M. (2001). Econometric analysis of cross section and panel data. Cambridge: The MIT Press.Google Scholar