Cigarette and Tobacco Consumption: Have Anti-Smoking Policies Made a Difference?

The consumption of cigarette and tobacco products in Australia is modelled using the rational addiction theory of Becker and Murphy, augmented by data on advertising, regulatory intervention, and demographic factors. Over the past 35 years, price (including tobacco taxes), real income, and demographic effects explain most of the variation in tobacco consumption. Advertising by tobacco companies has had a relatively small direct effect on consumption. Work-place smoking bans and health warnings on cigarette packs have had a relatively minor impact, while anti-smoking advertising and bans on electronic media advertising have had no detectable direct effect.     

The Hazards of Starting and Quitting Smoking: Some Australian Evidence

The empirical analysis employs individual level data from the Australian Health Survey combined with retrospective data on tobacco price matched to the age at which the individual started and quit smoking. Split-population hazard models are estimated for both starting and quitting smoking. The analysis suggests price plays a significant role in the decision to start smoking but not in the decision to quit. Further sensitivity analysis of different age groups and an alternative data source, questions the robustness of the significant role of price in the smoking initiation decision. From a policy perspective, the results indicate that increases in tobacco taxation can be an important instrument in reducing the incidence of smoking, but should be combined with other mechanisms such as mandating smoke-free environments and antismoking education. Our results strongly support the targeting of antismoking campaigns towards teenagers.     

Costs of smoking and attempts to quit

Using recent cross-sectional state-level data for the US, this article examines smoking quitting behaviour by smokers. In particular, we uniquely focus on how the costs of smoking, both direct and indirect costs, induce smokers to quit. Results show that the price of cigarettes and home smoking restrictions are the primary thrusts behind smokers' quit decision. The indirect costs due to workplace smoking restrictions, medical costs and a lack of insurance do not seem to significantly matter. The habit-forming effect of cigarettes is shown to lead to greater quit attempts. Policy implications are discussed.     

Is there the threshold effect of cigarette price on smoking prevalence? A cross-country panel data analysis

This article shows new cross-country evidences by empirically investigating the joint effects of cigarette price levels and joining the World Health Organization Framework Convention on Tobacco Control (WHO FCTC) on smoking prevalence in 74 countries over the period of 2000, 2003, 2005 and 2006. We assessed cigarette price elasticity for three national income levels using different databases on cigarette price from the Economist Intelligence Unit (EIU), demographic and socioeconomic country characteristics from the World Bank and adjusted smoking prevalence rates published by various yearly WHO reports on the global tobacco epidemic from 2000 to 2010. A panel threshold regression was used to capture the nonlinear effects that cigarette prices on smoking prevalence at the three national income levels endogenously determined by estimation. Our findings supported the evidence that joining the WHO FCTC would have a positive effect on reducing cross-country smoking prevalence, especially among countries with low- and medium-income levels. Moreover, some simulated results show that a price hike of 10% would reduce smoking prevalence in countries with national income levels equal to or less than US$1900 and by 7.2% in countries with national income levels between US$1900 and US$2510 more than those with national income levels that are higher than US$2510.     

International outsourcing and the demand for skills

This paper explores the impact of international outsourcing on the demand for skills in three small and open EU economies. A model of variable costs and factor demand functions for different skill levels and imported as well as domestic materials are constructed. International outsourcing is treated directly as a substitution process between labour of different skills and imported inputs. The direct consequence of international outsourcing for labour is measured by the cross price elasticities. These cross price elasticities indicate a negative outsourcing impact on low- and medium-skilled labour in the three countries and on high-skilled labour in two out of the three countries. This outsourcing effect on labour is compared with the direct effect of embodied technical change and of the technical change bias. International outsourcing has a more unambigous and significant negative impact on labour than technical change. Technical change is either labour using (embodied technical change) or only slightly biased in favour of high-skilled labour. When the cost savings effect of international outsourcing is taken into account, an indirect positive stimulus for all skill categories arises from a greater demand for goods. It can be shown, that this indirect positive effect can compensate for a large part of the negative substitution impact of international outsourcing on labour.     

Demand for cigarettes in the United States: effects of prices in bordering states and contiguity with Mexico and Canada

Based on a cross-section of US states for 2004, this article estimates a demand function for cigarettes after including a proxy for prices in the bordering states and simple proxies for contiguity with Mexico and Canada and for being a major tobacco producer. One major point seems to be that the negative elasticity for within-state price is similar in magnitude to the positive elasticity for the (lowest) price in bordering states. Several additional points also seem noteworthy. First, having a border with Mexico lowers sales in the state sizably. Second, the share of Hispanic/Latino population in the state also lowers sales significantly. Third, contiguity with Canada appears to have no significant effect. Fourth, partial impact of the state being a major tobacco producer appears minor even though consumption in these states is considerably higher. Fifth, education shows the expected negative association with cigarette consumption, but its statistical significance is low. Last, income carries a weak negative parameter, perhaps reflecting the lower prevalence of smoking in higher-income households.     

Volatility and growth: Governments are key

There exists a persistent disagreement in the literature over the effect of business cycles on economic growth. This paper offers a solution to this disagreement, suggesting that volatility carries not only a positive direct effect, but also a negative indirect effect, operating through the insurance mechanism of government size. Theoretically, the net growth effect of volatility is then ambiguous. The paper reveals the underlying endogeneity of government size in a balanced panel of 90 countries from 1961 to 2010. In practice, the negative indirect channel dominates in democracies, but with less power to choose public services in autocratic regimes the positive direct effect takes over. Consequently, volatile growth rates are detrimental to growth in democracies, but beneficial to growth in autocracies. The empirical results suggest that a one standard deviation increase of volatility lowers growth by up to 0.52 percentage points in a democracy, but raises growth by 1.66 percentage points in a total autocracy. These findings point to a crucial intermediating role of governments in the relationship between volatility and growth. Both the size of the public sector and the regime form assume key roles.     

Hedonic prices indexes for new passenger cars in Portugal (1997–2001)

This paper evaluates the effects of quality change on the price index for new passenger cars in Portugal for the years 1997–2001. Hedonic regression models are studied, giving particular emphasis to the relation between the form of the price index and the econometric techniques used for inference. The results of the empirical part of the paper indicate that during this period the changes in the quality of new cars sold in Portugal are responsible for price increases averaging 4.8% per year. Because this quality change was not entirely taken into account, in recent years the CPI component corresponding to the sales of new passenger cars may have been overestimated by as much as 2.2 percentage points per year. This corresponds to an overestimation of the overall CPI by about 0.15 percentage points per year.     

How do consumers switch between close substitutes when price variation is small? The case of cigarette types

Past empirical studies report ambiguous results regarding the magnitude and significance of substitution between different types of smoking tobacco. Since all types of tobacco contain nicotine this is quite surprising. Using a 20-year rotating panel data set of Norwegian households and a multinomial logit model, we find evidence that consumers switch between tobacco types: first, estimated price effects on choice probabilities have mostly expected signs, albeit their statistical significance vary across different metrics, second, household characteristics affect tobacco composition significantly. These findings suggest that consumers’ choices are ‘locked’ when the relative price variation is small, as has been the case in most of the data period, but that larger changes could induce large-scale switching between tobacco types. Our conjecture is that there is a latent potential for switching, which will become manifest if prices change sufficiently. Similar considerations are likely to have relevance for other close substitutes.     

Impact Fees and Real Estate Prices: Evidence from 35 Chinese Cities

Local governments often charge developers impact fees to finance local public goods. This has been practiced in Chinese cities for more than two decades; however, no empirical studies have tested the effect of impact fees on real estate prices. Using a panel data set for 35 large- and medium-sized cities from 1998 to 2008, we find that impact fees lead to a significant increase in real estate prices. For a given city, an increase in impact fees by one yuan leads to an increase of about 5 yuan in the price of newly-built housing; a 1% increase in impact fees leads to an increase of 5 percentage points in the housing price index and 7 percentage points in the land price index.     

New Evidence on Youth Smoking Behavior based on Experimental Price Increases

The high youth smoking prevalence remains an important public policy challenge into the 21st century. This study applies a unique approach to analyzing the impact of cigarette prices on youth smoking cessation by evaluating reactions among high school students to several alternative hypothetical price increases. It concludes that many young smokers believe that they would quit smoking or decrease their smoking intensity in response to a cigarette price increase. The estimated price elasticity of cessation is between 0.930 and 0.895. The results indicate that youth expect to change their smoking behavior even when the price change is relatively small. However, the behavioral change is most dramatic among those exposed to the largest price increases, suggesting a sustained impact of higher price on cigarette consumption. (JEL I18 )     

Bioenergy and global land-use change

This is the first article that econometrically estimates the global land-use change impact of bioenergy. Applying time-series analytical mechanisms to fuel, biofuel and agricultural commodity prices and production, we estimate the long-run relationship between energy prices, bioenergy production and the global land-use change. Our results suggest that rising energy prices and bioenergy production significantly contribute to the global land-use change both through the direct and indirect land-use change impact. Globally, the total agricultural area yearly increases by 35 578.1 thousand ha due to increasing oil price, and by 12 125.1 thousand ha due to increasing biofuel production, which corresponds to 0.73% and 0.25% of the total worldwide agricultural area, respectively. Soya land-use change and wheat land-use change have the highest elasticities with respect to both oil price and biofuel production. In contrast, nonbiomass crops (grassland and rice) have negative land-use change elasticities. Region-specific results suggest that South America faces the largest yearly total land-use change associated with oil price increase (+10 600.7 thousand ha), whereas Asia (+8918.6 thousand ha), South America (+4024.9 thousand ha) and North America (+1311.5 thousand ha) have the largest yearly total land-use change associated with increase in biofuel production.     

Exchange rate pass-through in Canadian manufacturing: its direct and indirect components

Changes in the exchange rate have direct and indirect effects on the prices of domestically produced goods and imports in the domestic market. The direct effects originate with the impact of the exchange rate on the marginal cost of imports; the indirect effects, with its impact on the price of materials used by domestic producers and hence on their marginal costs. Direct and indirect exchange rate pass-through elasticities are estimated for 37 Canadian manufacturing industries and their determinants are examined in a cross-section analysis. It is found that the direct and indirect elasticities are approximately equal in size for domestic goods, while the direct effect is dominant for imports. For a small number of industries, the net result of the direct and indirect effects is that a depreciation of the domestic currency increases the competitiveness of imports, contrary to conventional analysis. Important determinants of the direct (indirect) elasticities are the import share and non-tariff barriers (the responsiveness of domestic costs to changes in the exchange rate, and concentration).     

Tobacco policy and tobacco use: differences across tobacco types,gender and age

Using state-level data for 1997, this paper studies the effectiveness of tobacco policies at reducing tobacco use across different population groups in the USA. The effectiveness of tax (price)-based and non-price tobacco policies are examined on tobacco prevalence (including cigarettes and smokeless tobacco) across gender and age. Besides shedding light on the efficacy of sub-national tobacco policies, the results also examine the extent of spillovers of policy actions across tobacco types. Significant differences in tobacco use are found across gender, age, policies, and between smoking and smokeless tobacco. Policy implications are discussed.     

How Much Does Annuity Demand React to a Large Price Change?

In this paper, we present new evidence for the effect of changes in annuity prices on the decision to annuitize. We exploit an unprecedented change in policy in several Swiss occupational pension plans. There is an implied 8 percent reduction in the rate at which retirement capital is translated into an annuity, and this represents a net present value loss of CHF 18,500 (around US$ 20,000). To estimate the impact of this change, we use data from companies that changed their prices and from one large company that did not. We find that the price change reduces the propensity to annuitize among affected individuals by 16.8 percentage points.     

A double-hurdle approach to modelling tobacco consumption in Italy

This article analyzes the determinants of tobacco expenditures for a sample of Italian households. A Box–Cox double-hurdle model adjusted for heteroscedasticity is estimated to account for separate individual decisions concerning smoking participation and tobacco consumption and to correct for nonnormality in the bivariate distribution of the error terms. Nested univariate and bivariate models are found to be excessively restrictive, supporting the adequacy of a generalized specification. Estimation results show that consumption decisions are significantly affected by income and demographic characteristics. In particular, income positively impacts tobacco expenditure, while participation probability substantially declines as age increases. The existence of significant gender differences in both smoking participation and tobacco consumption patterns is found, while high education and white-collar occupation reduces the likelihood to smoke and tobacco expenditure levels. Single adult households have a lower probability of smoking initiation even if, conditional on smoking, they consume more. Finally, complementarity between tobacco and alcohol beverages suggests the necessity of joint public health strategies.     

Deregulation and the competitive fringe: Owner-operators in the trucking industry

This paper assesses the direct and indirect effects of regulatory reform in the trucking industry on the employment of owner-operators. We utilize a probit estimation form derived from driver utility functions to estimate the change in the probability that a truck driver is an owner-operator following deregulation.We find that a representative driver with mean characteristics is 155.6 percent more likely to choose employment as an owner-operator in the deregulated environment. Thirty-six percentage points of this increase is due to the indirect effects of deregulation, which operate primarily through changes in wage differentials and unionization. The direct effect of deregulation accounts for a 120% increase in the probability of a driver choosing employment as an owner-operator.We are especially grateful to David Besanko, Ronald Braeutigam, Robert Drago, and John Heywood for insightful comments. For helpful discussions, we thank Marcus Alexis, Aaron Gellman, Leon Moses, Robert Porter, Ian Savage, Mark Shanley, Carol Simon, Paul Wolfson, and Christopher Udry. For their comments on an earlier draft, we thank Thomas Corsi, Curtis Grimm, and Theodore Keeler. We are grateful for information sent to us by Leon Witconis ofOwner Operator Magazine and William A. Coop ofRoad King Magazine. We acknowledge financial support from the National Science Foundation, Grant # SES-9111131 and from the Transportation Center of Northwestern University. We also thank two anonymous referees for their efforts in helping us to improve this paper.     

Fundamentals, information, and international capital flows: A welfare analysis

In the recent discussion surrounding the design of a new international financial architecture, enhancing transparency has widely been proposed as a policy essential for increasing the efficiency of international capital markets. This paper uses a simple two-country (two-agent) general equilibrium model with incomplete markets and production to explore the welfare consequences of an increase in public information about country-specific fundamentals (increase in transparency). An improvement in the quality of information has two effects on the ex ante welfare of individual countries: A direct effect that increases the efficiency of global capital allocation and welfare, and an indirect general equilibrium effect that increases asset price volatility and may decrease welfare. When the degree of risk-aversion is low, at least one country will gain from an increase in information quality. If the degree of risk-aversion is high, then there are robust examples of economies for which an increase in information hurts all countries. The paper also discusses how certain institutional arrangements (international derivative markets, international agency) could ensure that all countries gain from better information by providing insurance against information-induced asset price risk.     

DO MINIMUM LEGAL TOBACCO PURCHASE AGE LAWS WORK?

This paper uses a regression discontinuity design to estimate the impact of the minimum legal tobacco purchase age (MLTPA) laws on smoking behavior among young adults. Using data from the confidential version of National Longitudinal Survey of Youth (1997 Cohort), which contains information on the exact birth date of the respondents, we find that the impact of the MLTPA on several indicators of smoking among youth is moderate but often statistically insignificant. However, for those who reported to have smoked before, we show that granting legal access to cigarettes and tobacco products at the MLTPA leads to an increase in several indicators of smoking participation, including up to a 5 percentage point increase in the probability of smoking. These results imply that policies that are designed to restrict youth access to tobacco may only be effective in reducing smoking behavior among certain groups of young adults. (JEL I10, I18, I19)     

Patterns and Determinants of Price Changes: Analysing Individual Consumer Prices in Austria

Abstract. We provide empirical evidence on the degree and characteristics of price stickiness in Austria by estimating the average frequency of price changes and the duration of price spells from a large dataset of individual price records collected for the computation of the Austrian consumer price index. The mean (median) duration of price spells in Austria amounts to 14 (11) months, but there is considerable heterogeneity across sectors and products. We find that price increases occur only slightly more often than price decreases. For both directions, the average magnitude of price changes is quite large (11% and 14%, respectively). The introduction of the euro cash in January 2002 led to more frequent but, on average, smaller price adjustments than usual. Estimating the probability of a price change in a panel probit model, we find a small but positive effect of the price spell duration on the incidence of price changes. Furthermore, product‐specific inflation, the size and the sign of the last price change and the period of the euro introduction significantly affect the probability of a price change.