In the last few years, the price of cigarettes has increased considerably in the USA. In addition, a number of states have also imposed smoking bans. These increases in the cost and barriers to smoking have created a natural experiment to study relationships between smoking and drinking behaviors. In this study, we employ data from the first six waves of the Health and Retirement Survey (HRS) to analyze the effects of smoking bans and cigarette prices on alcohol consumption. We also test if past cigarette and alcohol consumption affect current alcohol consumption as predicted by co-addiction models. We estimate dynamic panel models using GMM estimators. Our approach allows us to obtain consistent estimates irrespective of the number of time periods. The three main findings of this study are: (1) there is positive reinforcement effect of past cigarette consumption on current alcohol consumption, (2) smoking bans reduce alcohol consumption and (3) there is a positive effect of cigarette prices on alcohol consumption.
Copyright 2004 John Wiley & Sons, Ltd.