What Can we Learn about Smoking from 150 Years of Italian Data?

This paper estimates dynamic demand models for tobacco consumption in Italy from 1871 to 2010. The empirical analysis is based on an entirely new dataset. Because the tobacco sector was mostly managed by the state, rich and detailed historical documentation is available. Price elasticities are estimated both for aggregate tobacco consumption and its four major components (cigars, cigarettes, cut tobacco, and snuff) for three separate sub-periods: 1871–1913, 1919–1939, and 1946–2010. Elasticities consistently belong to a narrow set. We discuss the public policy implications of a seemingly iso-elastic tobacco demand function