Health Selection and the Effect of Smoking on Mortality

We show that individuals who are in poorer health, independently from smoking, are more likely to start smoking and to smoke more cigarettes than those with better non‐smoking‐related health. We present evidence of selection, relying on extensive data on morbidity and mortality. We show that health‐based selection into smoking has increased over the last 50 years with knowledge of its health effects. We show that the effect of smoking on mortality is greater for more highly educated individuals and for individuals in good non‐smoking‐related health.     

Consumption externalities with endogenous time preference

This paper shows that in a model with inelastic labor supply, consumption externalities have impacts on stationary consumption and capital. The key element in observing the effects of consumption externalities on stationary consumption and capital is the endogeneity of the time preference rate, which depends on future-oriented resources rather than on private consumption. We conclude that when individuals experience jealousy, they become more impatient, leading to a lower level of capital stock and a higher level of consumption relative to those of the social optimum, while when they experience admiration, these relationships are reversed. We examine an optimal tax policy that replicates the socially optimal path in the centrally planned economy. Finally, using numerical analysis we explore how this economy evolves through time.      

Advertising media and cigarette demand

Using state-level panel data for the USA spanning three decades, this research estimates the demand for cigarettes. The main contribution lies in studying the effects of cigarette advertising disaggregated across five qualitatively different groups. Results show cigarette demand to be near unit elastic, the income effects to be generally insignificant and border price effects and habit effects to be significant. Regarding advertising effects, aggregate cigarette advertising has a negative effect on smoking. Important differences across advertising media emerge when cigarette advertising is disaggregated. The effects of public entertainment and Internet cigarette advertising are stronger than those of other media. Anti-smoking messages accompanying print cigarette advertising seem relatively more effective. Implications for smoking control policy are discussed.     

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 )     

Drinking and academic performance in high school

I investigate the extent to which negative alcohol use coefficients in Grade Point Average regressions reflect unobserved heterogeneity rather than direct effects of drinking, using 2001 and 2003 Youth Risk Behaviour Survey data on high school students. Results illustrate that omitted factors are quite important. Drinking coefficient magnitudes fall substantially in regressions that control for risk and time preference, mental health, self-esteem and consumption of other addictive substances. Moreover, the impact of binge drinking is negligible for students who are less risk averse, heavily discount the future or use other drugs. However, effects that remain significant after accounting for unobserved heterogeneity and are relatively large for risk averse, future-oriented and drug-free students suggest that binge drinking might slightly worsen academic performance. Consistent with this, the relationship between grades and drinking without binging is small and insignificant on the extensive margin and positive on the intensive margin.     

Price Discrimination with Private and Imperfect Information

In this paper, I investigate the competitive and welfare effects of the improvements in information accuracy in markets where firms can price discriminate after observing a private and noisy signal about a consumer's brand preference. I show that when firms believe that consumers have a brand preference for them, then they charge more to these consumers, and this price has an inverse U‐shaped relationship with the signal's accuracy. In contrast, the price charged after a disloyal signal has been observed falls as the signal's accuracy rises. While industry profit and overall welfare fall monotonically when price discrimination is based on increasingly more accurate information, the reverse happens to consumer surplus.     

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.     

Advertising and the aggregate demand for cigarettes

The study specifies a model which explains aggregate demand for cigarettes in terms of price, income and advertising. Publicity about the health effects of smoking is treated as a form of ‘anti-advertising’. A distinctive feature is that an attempt is made to measure advertising in terms of ‘messages’ rather than using the more common, but theoretically inappropriate, expenditure measure. The model is tested against quarterly U.K. data for the period 1957 II to 1968 IV, using ordinary least squares (OLS) regression. The results suggest that advertising had a positive, statistically significant impact on sales, and that this impact was only partly offset by the amount of publicity given to the health effects of smoking.     

Smoking and absenteeism

Studies of the causes of absence from work tend to indicate uniformly that smokers miss more work than non-smokers. Some estimates of this increased smoker absenteeism range as high as 32%, or about 81 million additional lost days of work per year in the US alone. Unfortunately these studies, in the main, employ only a simple means difference test as a statistical basis for their deductions, and hence are incapable of determining whether smokers miss more work because they smoke or for other reasons common to smokers as a group. In this study, we posit a native model of absenteeism and employ Tobit analysis to estimate its response to various determinants using data from the 1968 PSID. We than empoly a Blinder-type decomposition technique to attempt to determine the amount of absenteeism attributable directly or indirectly to smoking behaviour of workers. Our results suggest that smokers miss no more work than non-smokers because they smoke. Rather smokers tend to be younger, heavier drinkers, blue collar workers, etc., and these groups will miss more work regardless of whether or not they smoke.     

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)     

PERCEIVED ARSENIC‐RELATED MORTALITY RISKS FOR SMOKERS AND NON‐SMOKERS

Prolonged ingestion of arsenic in drinking water can increase the risks of dying of lung and bladder cancer, particularly for smokers. In a survey of arsenic hotspots in the United States, we elicited individuals' subjective mortality risks related to the presence of arsenic in drinking water. Using this data, we address whether smokers perceive mortality risks from this source differently from non‐smokers. We find that those who have smoked at some point in their life have significantly higher perceived arsenic mortality risks than those who have never smoked, on average. We also find that the sample group of current smokers has higher average perceived arsenic mortality risks than those who have quit smoking. We model the decision to treat water for arsenic and find some evidence that current smokers are less likely to engage in this mitigating behavior than are ex‐smokers or non‐smokers even though their perceived risk is higher. We infer that smokers are either less risk averse or have a higher rate of time preference than non‐smokers and ex‐smokers. (JEL I0, D81, Q53)     

Prices and social behaviour: Evidence from adult smoking in Canadian Aboriginal communities

This paper provides estimates of tobacco price elasticity explicitly distinguishing between two price effects: the direct effect, reflecting individual reaction to a price change, and the indirect effect, whereby price influences the individual by changing community smoking behaviour. Canada's Aboriginal communities are small and secluded, allowing for plausible identification of reference groups on a relatively large scale. Estimates suggest a 10% increase in price decreases daily smoking by 0.91 percentage points (2.11%), occasional smoking by 1.24 percentage points (8.27%) and average smoking intensity by 0.15 cigarettes per day (2.9%). It is found that the indirect effect almost doubles the response to a change in tobacco prices over the direct effect alone.     

Poverty and probability: aspiration and aversion to compound lotteries in El Salvador and India

Some experimental participants are averse to compound lotteries: they prefer simple lotteries that depend on only one random event, even when the simple lotteries offer lower expected value. This paper proposes that many behavioral “investments” represent more compound risk for poorer people—who often face multiple dimensions of deprivation—than for richer people. As a result, identical aversion to compound lotteries can prevent investment among poorer people, but have no effect on richer people. The paper reports five studies: two initial studies that document that aversion to compound lotteries operates as an economic preference, two “laboratory experiments in the field” in El Salvador, and one Internet survey experiment in India. Poorer Salvadoran women who choose a compound lottery are 27 percentage points more likely to have found formal employment than those who chose a simple lottery, but lottery choice is unrelated to employment for richer women. Poorer students at the national Salvadoran university choose more compound lotteries than richer students, on average, implying that aversion to compound lotteries screened out poorer aspirants but not richer ones. Poorer and lower-caste Indian participants who choose compound lotteries are more likely than those who choose simple lotteries to have a different occupation than their parents, which is not the case for better-off participants. These findings suggest that the consequences of aversion to compound lotteries are different in the context of poverty and disadvantage.     

Effects of Pregnancy and Birth on Smoking and Drinking Behaviours: A Comparative Study Between Men and Women

Using panel data obtained from monthly surveys for 3 years, we examined how the effects of life events on smoking and drinking behaviours differ between men and women. The key findings were that: (i) consumption of alcohol and cigarettes by men and women were lower during pregnancy and after childbirth than before pregnancy; (ii) pregnancy and childbirth led women to stop drinking and led men to reduce their alcohol consumption but not to stop drinking; and (iii) marriage, pregnancy and childbirth led women to stop smoking and marriage and birth led men to stop smoking but the effects of pregnancy on men are unclear.     

THE DEMAND FOR CIGARETTES IN TAIWAN: DOMESTIC VERSUS IMPORTED CIGARETTES

This paper uses annual time series data from Taiwan to empirically estimate the demand for cigarettes, in consideration of the import liberation of foreign cigarettes and of antismoking campaigns. The results indicate that the price elasticities for domestic and imported cigarettes are -0.6 and-1.1, respectively. The cross-price elasticities are 0.08 for domestic and 2.78 for imported cigarettes. The spread of cigarette health information has had a significantly negative effect on cigarette consumption. In addition, this study offers mild support to the argument that opening the market to imported cigarettes has resulted in significant increases in overall cigarette consumption. (JEL D12, 118)     

Cutting through the smoke: separating the effect of price on smoking initiation,relapse and cessation

I employ a large national representative dataset (Current Population Survey-Tobacco Use Supplements) to investigate how cigarette prices affect smoking decisions. A standard econometric approach is to estimate the relationship between cigarette prices and smoking participation at a point in time. I extend this approach to model past-year decisions to start, resume or quit smoking. Considering reverse causality, I apply an instrumental variable (excise taxes) for cigarette prices. I include an index of state-level anti-smoking sentiment to control for omitted variable bias. After estimating separate models for smoking initiation, relapse and cessation and for different age groups, I find no evidence that increasing taxes on cigarettes can prevent the onset of youth smoking. Neither does it effectively induce young smokers to quit. However, cigarette prices do play an important role to prevent relapse and encourage quitting at older ages.     

Cigarette demand and effectiveness of U.S. smoking control policies: state-level evidence for more than half a century

Using state-level U.S. data over 1956–2008 this paper examines the demand for cigarettes. The long data span enables us to compare and evaluate the effectiveness of various policies and to examine cigarette demand across individual states. Our results show cigarette demand to be price inelastic, smoking-habit effects to be strong, income effects to be small, and border price effects can be significant. These findings are quite robust across alternate model specifications. None of the three smoking control policies considered (Fairness Doctrine, Broadcast Ban, and Master Settlement Agreement) were shown to be effective in curbing overall smoking, although most were effective in a few states. Policy implications are discussed.     

Cigarette tax revenues and tobacco control in Japan

The hypotheses of non-addiction, myopia and rational addiction are tested using annual, quarterly and monthly data. Changes in the prices of Japanese cigarettes can be viewed as exogenous from the point of view of consumer behaviour, because the Japanese government controls cigarette prices. The empirical results of this paper support the addiction hypothesis. The short-run and long-run price elasticities range from ?0.338 to ?0.421, and from ?0.679 to ?0.686, respectively; thus, increases in tax revenues in the long run are likely to be smaller than those in the short run. As a result, tax increases would be an effective means of curbing smoking and reducing its social cost. Furthermore, the debt compensation programmes for the Japan Railway and the National Forestry will not go according to plan, unless revenues are increased in the future.     

Routine

Temporal routine - maintaining the same schedule from day to day - saves time. It is also boring and inherently undesirable. As such, the amount of temporal routine a person engages in is partly an economic outcome, affected by variations in the price of time, household income and the ability to generate variety. Using time-budget data from Australia, Germany, the Netherlands and the United States, I show that men engage in more routine behavior than women, because they spend more time in (routine) market work. More educated people engage in less routine behavior; higher household incomes enable people to purchase more temporal variety. Spouses’ temporal routines are highly complementary. The positive income effects and impacts of schooling indicate yet another avenue by which standard measures of inequality understate total economic inequality.     

Nonlinear pricing with self-control preferences

A basic assumption of economics is that consumers choose what they want. However, many consumers find it difficult to stop overeating, overspending, smoking, procrastinating, etc, even though they want to. In reality, consumers have temptation and it is psychologically costly to exercise self-control. To clarify the implications of the existence of temptation and self-control costs, this paper studies a firm's optimal selling strategy exploiting the behavioral features of consumers. We characterize optimal nonlinear pricing schemes for a monopoly when self-control is costly for consumers. Since consumers have a preference for commitment, the firm faces a trade-off between offering a small menu that makes the consumers’ self-control easier and offering a large menu that achieves better price discrimination. We show that the optimal menu resembles the one in the standard nonlinear pricing problem with a price ceiling, where the upper bound on prices is determined endogenously by a participation constraint. The ceiling motivates the firm to offer a relatively flat and compact price schedule, serving more consumers with low demand. The characterization also shows that the firm may earn less if consumers have temptation.