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Alcohol and Cigarettes: Substitutes or Complements?
Totzauer, Přemysl ; Koblovský, Petr (advisor) ; Babin, Jan (referee)
This paper uses agregate level data in the Czech Republic from 1995 to 2008 to estimate if alcohol and cigarettes are complements or substitutes. The question whether alcohol and cigarettes are substitutes or complements is crucial for considering efficient anti-drug policies, however there has been only a few discussion regarding this topic. My estimation results suggest that cigarette price plays a significant role in both cigarettes and alcohol demand and an increase in cigarette price leads to a decrease in both cigarettes and alcohol consumption. This suggest that alcohol is a complement to cigarettes and anti-drug policy focused on cigarettes causes double win effect. Alcohol price increase leads to increase in cigarette consumption but alcohol price is statistically signifficant neither in alcohol nor in cigarette consumption, therefore we can't use this as evidence for cigarettes being substitutes to alcohol.

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