HURDLE MODELS OF ALCOHOL AND TOBACCO EXPENDITURE IN SOUTH AFRICAN HOUSEHOLDS

Estimates of participation or expenditure elasticities depend upon the assumptions made regarding the observation of zero expenditure at the household level. This research examines two single-hurdle models across two commodities for which nearly two-thirds of the observations are zero. The research shows that one hurdle model consistently outperforms the other, and does so for intuitively appealing reasons. Copyright (c) 2008 The Authors. Journal compilation (c) Economic Society of South Africa 2008.