Effect of generic cigarettes on US cigarette demand and smuggling

This paper examines the effects of generic cigarettes on overall cigarette demand and smuggling, and studies influences of casual and organized smuggling for the United States. Generic cigarettes lower the price elasticity and diminish the effect of formal smuggling.     

The Distribution of Household Health Expenditures in Australia*

Out‐of‐pocket health expenditures in Australia are high in international comparisons and have been growing at a faster rate than most other health costs in recent years. This raises concerns about the extent to which out‐of‐pocket costs have constrained access to health services for low income households. Using data from the ABS Household Expenditure Survey 2003–2004, we model the relationships between health expenditure shares and equivalised total expenditure for categories of out‐of‐pocket health expenditures and analyse the extent of protection given by concession cards. To allow for flexibility in the relationship we adopt Yatchew's semi‐parametric estimation technique. This is the first detailed distributional analysis of household health expenditures in Australia. We find mixed evidence for the protection health concession cards give against high out‐of‐pocket health expenditures. Despite higher levels of subsidy, households with concession cards do not have lower out‐of‐pocket expenditures than non‐cardholder households except for the highest expenditure quintile. Cards provide most protection for GP out‐of‐pocket expenditures.     

Cost-Effective Prevention of Hip Fractures

The main objective of the analysis in this article is to do a health economic study of a preventive program that may influence the risk of hip fractures for people age 65 and older. The analysis of health promoting measures aimed at the prevention of hip fractures shows that there is a large potential for reducing costs and achieving significant health benefits within the older groups of the population. Prevention of hip fractures in the best cities seems to be cost-effective because it dominates a situation without any prevention. This implies a reduction in the total costs for society and an improvement in the quality of life and life expectancy.     

THE EFFECT OF GOVERNMENT POLICY ON TOBACCO ADVERTISING STRATEGIES

This paper contributes to the very limited literature examining the factors determining tobacco companies' advertising strategies. The paper explores whether firms in the UK tobacco market significantly changed their advertising expenditure in the face of proposed changes to the UK and European Commission tobacco advertising legislation. The results suggest that changes in legislation have little impact on firms' advertising strategies for existing brands, but that legislative changes impact upon product launch dates. Our results also offer some information on the nature of firm interdependencies in the UK tobacco industry.     

Food security in Kenya: Insights from a household food demand model

This paper evaluates the household food security situation in Kenya in terms of access to food. We apply a quadratic almost ideal demand system (QUAIDS) model to nationally representative household survey data from Kenya, and estimate and interpret price and expenditure elasticities as indicators of household sensitivity to market shocks. Our estimation results show positive expenditure elasticities, close to unity, while all compensated and uncompensated own-price elasticities are negative and smaller in magnitude. A complementary welfare analysis shows high compensated variations in the long run, ranging between 34% and 131% across food groups. This suggests that rising relative food costs have led to deterioration of the food security situation in Kenya, and the most severely affected households seem to be those that rely on informal markets and reside in rural areas. To improve food security, targeted income support could be a more effective policy than price support, given the much higher estimated expenditure elasticities.     

Sun,sand and September 11: a model of tourism demand for the Maldives

Tourism is a key source of income for many small island economies, and so it is important to understand its determinants in such countries. We estimate a tourism demand model for the Maldives’ five main source markets and find that, in addition to the usual foreign income and own price variables, the cost of travel and of visiting alternative destinations (often missing from studies of this nature) almost always have a significant role. In addition, the country’s own marketing efforts prove effective at influencing demand. Finally, we find evidence the War on Terror has persistently depressed demand from some markets.     

Income effects and physician labour supply: evidence from the threshold system in Ontario

Abstract. We examine a reform to the physician threshold system in Ontario that provides a unique opportunity to assess the effect of fee changes on physician behaviour, free from the biases that potentially affect simple time‐series or cross‐section inference. We find that: (1) the income effects of fee changes are small, but significant; (2) the income effect dominates the substitution effect only for a minority of services with relatively low prices and high volumes; and (3) the cross effects of fee changes tend to be significant only for services with relatively high prices and low volumes.     

Factors Affecting Cigarette Demand

This paper addresses the impact of smoking restrictions in workplaces and educational establishments, cigarette price measures and various psychosocial indicators on cigarette demand, controlling for demographic and socio-economic factors. The data used for the analysis are collected via questionnaire that was administered in personal-in home interviews. A two-part model of cigarette demand [Cragg, J. G. “Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods,” Econometrica, 39, 5, 1971, pp. 829–44.] is estimated. According to the estimations, cigarette price measures do not influence cigarette demand. On the contrary, smoking restrictions in workplaces and educational establishments and most of the psychosocial variables are found to affect cigarette demand considerably.     

Fare elasticities of demand for direct and indirect flights in sub-Saharan Africa

This article examines the different demands for direct and indirect flights within sub-Saharan Africa. It develops both a simple reduced form model and a more refined two equation simultaneously system to examine bookings and fares on the major air transportation corridors. Using panel data, this allows estimation of the different fare elasticities of demand for direct and indirect services between the continents’ major cities as well as assessing the respective merits of the two models used.     

Adjustment costs and threshold effects in factor demand relationships

It has been recently argued that producers may not respond to every input price change in the way that a linear factor demand model would predict. This lumpy response is due to adjustment costs that are inherent in the act of adjusting the mix of inputs applied in the underlying production technologies. This study aims to provide a solid conceptual framework for these nonlinearities in factor demand relationships. Industry-specific implications of convex and non-convex adjustment costs for the linearity of the factor demand relationships as well as price and substitution elasticities are explored. A two-regime threshold system of factor demand equations is estimated for several manufacturing industries in the United States. Empirical results suggest significant threshold effects in the factor demand relationships in most nondurable goods sectors. The size and the nature of thresholds depend upon industry characteristics, including input composition and (non)convexity of underlying adjustment costs. Complete matrices of price and substitution elasticities for each industry are derived using estimates of threshold factor demand systems. Discussion of two contrasting cases in greater detail sheds light on how the effect of price shocks on factor demand relationships varies across industries with different adjustment cost structures.     

Market structure and communicable diseases

Abstract.  Communicable diseases pose a formidable challenge for public policy. Using numerical simulations, we show under which scenarios a monopolist's price and prevalence paths converge to a non-zero steady state. In contrast, a planner typically eradicates the disease. If eradication is impossible, the planner subsidizes treatments as long as the prevalence can be controlled. Drug resistance exacerbates the welfare difference between monopoly and first best outcomes. Nevertheless, because the negative externalities from resistance compete with the positive externalities of treatment, a mixed competition/monopoly regime may perform better than competition alone. This result has important implications for the design of many drug patents.     

Quality and quantity in primary care mixed‐payment models: evidence from family health organizations in Ontario

Abstract We study the impact of a mixed capitation model (the Family Health Organization, FHO) on quality and quantity outcomes among primary care physicians in Ontario. Using a panel of administrative data covering one year before and two years after the FHO model was introduced, we find that physicians in the FHO model provide about 6% to 7% fewer services and visits per day, but are between 7% and 11% more likely to achieve preventive care quality targets. These results suggest that the mixed capitation model with contractible quality indicators may be welfare improving relative to the FFS model.     

Impact of Italian smoking ban on business activity of restaurants,cafés and bars

We estimate the economic impact of the Italian smoking ban of 2005 on the catering sector using a quasi-experimental design. Our study indicates that the Italian smoking ban had a slight negative impact on sales of cafés and restaurants but had no effect on profits, earnings, or employment.     

Organic labelling,private label,and U.S. household demand for fluid milk

The U.S. fluid milk market has been experiencing two trends in the recent decade: the fast growth of private label milk and organic milk. Using the data from Nielsen Homescan Panel, we estimate a censored demand system to study the demand relations among types of milk differentiated by brand types and organic status. We find that sociodemographic factors still play important roles in household choice of milk types, and fluid milk, as a whole, is an inferior good. Moreover, as income increases, households are more likely to shift from buying conventional milk to organic milk and from private label conventional milk to branded conventional milk, as indicated by the asymmetric cross price elasticities. Corresponding implications for milk producers and marketers are discussed.     

The economics of TV tune-in

TV tune-in, namely the preview of forthcoming programs, is an important type of TV advertising. We examine TV tune-in as a continuous variable. First, tune-in can increase profits when TV stations are sufficiently differentiated and the market is partially covered. Second, tune-in crowds out program quality. Third, tune-in lowers advertisement supply. Further, tune-in can increase profits in a partially covered market if firms are sufficiently differentiated. Otherwise, it leads to low profits. We also identify the effects of tune-in on consumer surplus and social welfare and suggest that tune-in should be prohibited whenever it lowers program quality and social welfare.     

The role of low expectations in health and education investment and hazardous consumption

Abstract .  Young people with little 'social or health capital' may be more likely to take up hazardous consumption and shun investments in human capital, raising their likelihood of a 'rags to rags' sequence. First, diminishing marginal utility could raise the marginal benefit of hazardous consumption and the cost of investment. But poor youths may also have lower expectations of future success, independent of the choices they make. Lower expectations of success could reduce the future cost of hazardous consumption and benefit of investment. We test the effect of expectations on decisions to smoke, drink hazardously, exercise, and complete high school, using a longitudinal study of youth in New Zealand. We find that 15-year-olds' expectations of success predict the subsequent onset of smoking, lack of exercise, and failure to complete high school, but not hazardous drinking. While some of the influence of expectations can be explained by low social and health capital, IQ, and other factors, expectations retain a direct effect on smoking and exercise once these other factors are controlled for.     

Ticket pricing and the impression of excess demand

If willingness to pay depends on characteristics of other attendees, a monopolist will use a lineup as a screening mechanism only if a consumer's characteristic is inversely related to her cost of lining up. No capacity constraint is necessary.     

Effective global regularity and empirical modelling of direct, inverse, and mixed demand systems

Abstract .  This paper utilizes the notion of 'effective global regularity' and the intuition stemming from Cooper and McLaren (1996)'s General Exponential Form to develop a family of 'composite' (product and ratio) direct, inverse and mixed demand systems. Apart from having larger regularity regions, the resulting specifications are also of potentially arbitrary rank, which can better approximate non-linear Engel curves. We also make extensive use of duality theory and a numerical inversion estimation method to rectify the endogeneity problem encountered in the estimation of the mixed demand systems. We illustrate the techniques by estimating different types of demand systems for Japanese quarterly meat and fish consumption.     

Inverse demand systems and choice of functional form

Barten (Empirical Economics 18 (1993) 129) recently advocated estimation of a synthetic demand system that mechanically nests four other popular differential demand models. This paper follows a similar strategy, but in the context of four inverse share-equation demand systems: The Inverse Translog Demand System (ITLDS); the Inverse Almost Ideal Demand System (IAIDS); the Inverse Lewbel Demand System (ILDS); and the Inverse Non-Separable Linear Expenditure System (INLES). Each of these specifications is artificially nested in a Hybrid Inverse Demand System (HIDS). An empirical application to three categories of quarterly U.S. meat demand data over the period 1961-1996 indicates the HIDS is a preferred specification.