Effect on alcohol consumption

Another key issue that has not been explored in the Canadian context, and has also been

relatively unexplored in the US context as well, is the substitutability or complementarity

of cigarette and alcohol consumption. Ex ante, it is not clear if these activities will be

complementary or substitutable. If there is a fixed demand for such "vice" activities, then

when cigarette prices go up, individuals will substitute into drinking. But, if the activities

are pursued together, or if individuals assign a fixed budget to such activities, then as

cigarette prices go up, alcohol consumption may fall. In the US context, Dee (1999) finds

that smoking and drinking are complementary for youth; we are aware of no studies for

overall consumption. There is also no evidence...