Estimating demand elasticities for tobacco products and alcoholic beverages: the case of Greece

Authors: Fotini Economou, Ioanna Kountouri, Yannis Panagopoulos, Georgia Skintzi, Ekaterini Tsouma

Title: Estimating demand elasticities for tobacco products and alcoholic beverages: the case of Greece

Abstract

The aim of this paper is to examine the price and income demand elasticities for selected categories of tobacco products and off-trade alcoholic beverages in Greece. For this purpose we employ quarterly data for the period 2008-2016 using the two-stage least squares econometric procedure. The empirical results indicate that in addition to exploring the simple demand-price-income relationship it is necessary to examine possible substitution and complementarity relationships within a category focusing on the partial adjustment mechanism of demand, the existence of addiction and the type of addiction, as well as the existence of differences between short and long term elasticity. The divergence in the empirical findings among the products of each basic category indicates that it is preferable to investigate the demand elasticities for the individual categories of tobacco products and alcoholic beverages (if the data availability allows) given the key variations in size, sign and significance of the estimated elasticities. The conclusions are particularly important both for tax and health policy makers.