United States Demand for Tobacco by Type and Origin

Abstract

An Almost Ideal Demand System (AIDS) was utilized to model the United States demand for domestic and imported tobaccos. The model, which includes equations for domestic flue-cured tobacco, domestic air-cured (burley) tobacco, oriental tobacco, and imported flue-cured and burley tobacco, incorporates the impact of economic factors as well as changes in consumer tastes. In this model homogeneity was rejected under certain conditions, but symmetry could not be rejected. These results suggest that imported flue-cured and burley tobacco, to a limited extent, is a substitute for domestic flue-cured tobacco and is a complement for domestic air-cured tobacco. The trend toward lower average nicotine content of domestic cigarettes is shown to have a detrimenta1 effect on the demand for domestic flue-cured tobacco, but a beneficial impact on domestic air-cured (burley), and imported oriental tobaccos.