Leaves and Cigarettes: Modelling the Tobacco Industry
11 Pages Posted: 24 Jan 2007
Date Written: 2007
A vast literature analyzed the tobacco industry in the past: however, most of the previous studies dealt with final demand or crop production. Instead, there are only a few works which examined the whole tobacco industry in general, and the Italian and Greek ones in particular.
This book aims at filling this gap: this contribution is even more needed if we take into account that tobacco consumption is currently decreasing, but there is the possibility to grow tobacco for other purposes thanks to biotechnologies. In this context, quantitative models of the tobacco industry can be of great help for policy making.
To achieve this aim, the book is organized in three parts which describe three quantitative approaches:
I. An Econometric Modelling approach. The main advantage of econometric methods is the possibility to submit the models and their results to statistic validation. Moreover, econometric models can be used for simulation and/or forecasting exercises, and their performances can be checked with proper statistical tests, too. The empirical application with Italian tobacco data shows the interesting properties of this methodology in terms of forecasting performances and statistical properties.
II. A Linear Programming approach. The Positive Mathematical Programming, or PMP, is a methodology used in this work to simulate the effects of the EU reform scenarios on a sample of Italian farms. The PMP is able to reproduce the economic and production framework of the farms within the sample group, and estimate the future production choices, based on the changes in economic convenience of tobacco crops with respect to possible alternative production activities within the farm.
III. An Input-Output Matrix approach. In order to investigate the possible impacts of different scenarios, an Input-Output model at the national and regional level is developed and used. In this way employment, output and household income effects at the national and regional level can be revealed, while a linear programming model helps to identify the impacts on tobacco producing farms and examine the existence of possible alternative cultivation replacements to tobacco.
This book can be therefore of interest to both public policy makers, as well as academics and private investors, involved in the tobacco industry.
Keywords: Tobacco Industry, Econometric modelling, Linear Programming, Input - Output Matrices
JEL Classification: C13, C32, C61, C67
Suggested Citation: Suggested Citation