THE IMPACT OF PRICES AND CONTROL POLICIES ON CIGARETTE SMOKING AMONG COLLEGE STUDENTS

Smoking among youths and young adults rose throughout the 1990s. Numerous policies were enacted to try to reverse this trend. However, little is known about the impact these policies have on the smoking behavior of young adults. This article uses a dichotomous indicator of daily smoking participation in the past 30 days, an ordered measure representing the frequency of cigarette consumption, and a quasi-continuous measure of the number of cigarettes smoked per day on average to examine the impact of cigarette prices, clean indoor air laws, and campus-level smoking policies on the smoking behaviors of a 1997 cross section of college students. The results of the analysis indicate that higher cigarette prices are associated with lower smoking participation and lower levels of use among college student smokers. Local- and state-level clean indoor air restrictions have a cumulative impact on the level of smoking by current smokers. Complete smoking bans on college campuses are associated with lower levels of smoking among current smokers but have no significant impact on smoking participation. Bans on cigarette advertising on campus as well as bans on the sale of cigarettes on campus have no significant effect on the smoking behavior of college students.     

Advertising and Restrictions in the Cigarette Industry: Evidence of State-by-State Variation

Many studies estimate the relationship between advertising and consumption in the cigarette industry, with emphasis directed toward the national demand for cigarettes. However, in light of evidence that cigarette producers price discriminate across U.S. states, coupled with possible affects of advertising on market power, this article takes a less aggregate perspective by addressing the role of cigarette advertising and restrictions at the state level. The results show that although advertising has little effect on demand, it generally increases market power in the cigarette industry (particularly during periods of heightened advertising restrictions). Furthermore, the relationship between advertising, demand, and supply vary across states. (JEL L13 , L66 , I18 )     

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.     

ADVERTISING RESTRICTIONS, COMPETITION, AND ALCOHOL CONSUMPTION

Distilled spirits producers recently voted to eliminate their voluntary ban on broadcast advertising. The ban received public support because of the high social cost associated with alcohol consumption and the belief that advertising promotes alcohol consumption and abuse. In spite of this belief, the empirical evidence indicates that advertising has no significant effect on the market demand for distilled spirits. This evidence has led many policy economists to conclude that eliminating the ban will have no effect on alcohol consumption. The purpose of this research is to show that this conclusion is incorrect because it ignores the fact that advertising restrictions may affect industry competition as well as market demand.     

Testing for forward-looking behaviour: evidence from the enactment of smoking restrictions

This paper develops a new test for forward-looking behaviour based on the establishment of public smoking restrictions. Given that the announcement of these restrictions effectively increases the future cost of smoking, we should expect forward-looking smokers to curb their consumption before the restriction is effective due to complementarity between present and future consumption. I perform the estimation using detailed, high-frequency household-level purchase data. The results provide evidence against the forward-looking behaviour of smokers. Households do not reduce their cigarette purchases before announced public smoking restrictions are established; they only do so once the restriction is in effect.     

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.     

DOES ADVERTISING MATTER? ESTIMATING THE IMPACT OF CIGARETTE ADVERTISING ON SMOKING AMONG YOUTH IN DEVELOPING COUNTRIES

The goal of this paper is to evaluate the impact of cigarette advertising on smoking among youth in developing countries. Using micro‐level data from 19 developing countries, we examine the structural relationship between smoking behavior and advertising exposure and the reduced‐form relationship between smoking and advertising bans. Instrumental variables are used to address the endogeneity of advertising exposure. Country‐specific unobserved heterogeneity is further reduced by controlling for measures of antismoking sentiment and cigarette prices. After accounting for the endogeneity of advertising, we find that the positive correlation between smoking and advertising exposure in our sample can be largely explained by the disproportionately higher propensity of smokers to observe advertising rather than a direct causal effect of advertising on smoking. (JEL I12, I18)     

Unemployment,insurance and smoking

Using recent state-level data from the United States, this article examines new influences on cigarette demand. In particular, we uniquely focus on the effects of unemployment and health insurance coverage on smoking. Results show that higher cigarette prices, a lack of health insurance and restrictions on smoking at home, all lead to reduced smoking. On the other hand, literacy, income, unemployment, workplace smoking restrictions, smokeless tobacco taxes and tobacco-producing states do not seem to have an appreciable impact. The magnitude of the price elasticity of demand is greater than that found in the pre-MSA era. Policy implications are discussed.     

The US National Tobacco Settlement: the effects of advertising and price changes on cigarette consumption

This paper provides an econometric analysis of the effects of cigarette price and advertising changes stemming from the United States Tobacco Settlement of 1998. This is done by estimation of a demand function for cigarettes, based on data from both before and after the Settlement. The model is estimated using monthly time series data for the period 1990–2000. Results show that the increase in cigarette prices stemming from the Settlement reduced per capita cigarette consumption in the USA by 8.3%. However, the cigarette companies also increased advertising in the years immediately preceding and following the Settlement. This study estimates that this increased advertising partially offsets the effects of the higher prices, increasing cigarette consumption by 2.7 to 4.7%, and hence blunting the effects of the price increase by 33–57%.     

The Demand for Cigarettes in the Republic of Korea and Implications for Government Policy to Lower Cigarette Consumption

The government of the Republic of Korea has become concerned with reducing cigarette consumption, which historically has been very prevalent. This study contributes to the debate over cigarette policies in South Korea, with implications for other Asian countries with similar economic and cultural backgrounds. The authors estimate cigarette demand in South Korea over the period 1960–97, considering various government policies employed to reduce cigarette consumption. Results of the estimation suggest that taxation appears to be a viable means of reducing cigarette consumption, but methods to inform the public about the health hazards of smoking should be reconsidered and strengthened. (JEL H51 , I18 , L66 )     

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.     

ALCOHOL REGULATION AND DOMESTIC VIOLENCE TOWARDS CHILDREN

In recent years, economists have paid much attention to the demand for alcohol and the negative externalities associated with excessive drinking. Largely ignored in the literature is the link between alcohol use and domestic violence. Given the established positive relationship between alcohol consumption and acts of violence, the purpose of this paper is to examine the role that changes in the determinants of the demand for alcohol may play in reducing the incidence of violence aimed at children. Data on violence come from the 1976 Physical Violence in American Families survey. We estimate a model in which violent outcomes are affected by the state excise tax rate on beer; illegal drug prices, and other regulatory variables such as availability measures and laws restricting the advertising of alcohol. Results show that increasing the tax on beer can be an effective policy tool in reducing violence. Laws designed to make obtaining beer more difficult also may be effective in reducing violence, while restrictions on advertising and increases in illegal drug prices have no effects.     

CLEAN INDOOR AIR LAWS AND THE DEMAND FOR CIGARETTES

This paper empirically tests the effect of clean indoor air laws on smoking. Public place clean indoor air laws restrict cigarette smoking in public places such as restaurants. Private place clean air laws regulate smoking in private work places as well as in public places. This study uses a time series of cross sections of the 50 states of the United States and Washington, D.C., from 1975 through 1985, to estimate single equation and simultaneous equation models of cigarette demand. The single equation results indicate that both the public place law and the private work place law have a negative effect on cigarette demand. However, a test for endogeneity shows that the enactment of clean indoor air laws is a function of cigarette demand. Results from a simultaneous equations model indicate that the public place law has a significant negative impact on cigarette demand, while the work place law has no effect on cigarette demand. Although these results demonstrate that only states with low levels of smoking have passed work place clean air laws, the results do not imply that the level of smoking would not decrease if such a law were imposed in all states.     

THE IMPACT OF CIGARETTE ADVERTISING ON CONSUMER SURPLUS, PROFIT, AND SOCIAL WELFARE

This study estimates the effect of U.S. cigarette advertising on social welfare. Because economists hold different beliefs about the nature of advertising, the analysis uses three different empirical models to test the welfare implication of cigarette advertising. Each model employs estimates of a demand equation and a supply relation to calculate a single point estimate of the impact of advertising on profit, consumer surplus, and total surplus. Bootstrapping generates confidence intervals for each welfare estimate. The results indicate that the cigarette industry is not competitive and that advertising significantly increases market power. Further, advertising significantly reduces consumer surplus if it is either purely persuasive or purely informative but has no significant effect on total surplus.     

Kalman filter and the demand for cigarettes

kalman filter estimates of price, income and advertising elasticities are presented. An analysis of structural change in the demand for cigarettes in the US for the period 1929–86 is made. Estimated price and income elasticities are generally smaller, and the advertising elasticity larger, than estimates previously found. Cigarette demand is inelastic with respect to price and income, and advertising elasticity is statistically insignificant for the most part. Furthermore, both income and price elasticities decline over time while advertising elasticity tends to rise. Four time periods where structural change has occurred are identified. The health scare reports and the Fairness Doctrine Act have a significant impact on per capita cigarette consumption.     

LABOR MARKET IMPACTS OF SMOKING REGULATIONS ON THE RESTAURANT INDUSTRY

This paper examines the impact of smoking regulations on restaurant employment in West Virginia, a state with a high rate of smoking prevalence. Using a confidential establishment‐level dataset, our results suggest that smoking bans reduced restaurant employment by between 0.7 and 1.5 workers, depending on model specification. We find that smoking restrictions have heterogeneous impacts across establishments, with the largest impacts on mid‐sized establishments, defined as those with 10–29 employees. Our results also suggest that the impact of smoking restrictions was larger in counties with higher rates of smoking prevalence. (JEL L51, D78, H0)     

Smoking Behavior of Older Adults: A Panel Data Analysis Using HRS

Using longitudinal data from Health and Retirement Surveys over 1992–2010, this paper analyzes decisions by older American to continue smoking and the number of cigarettes to consume using two-part hurdle models with correlated effects. We build on the existing literature by incorporating a myriad of factors including cigarette prices, health shocks and smoke-free laws in one econometric framework. Our estimates indicate that higher cigarette prices play an important role in both reducing participation and the intensity of consumption even for this adult population. In addition, health shocks, as measured by newly diagnosed diseases, raise the probability of quitting, highlighting the ‘curative’ aspects of cessation. However, we find very little effect of health on smoking intensity if an older adult does not quit after a health shock. Per capita cigarette consumption in the US declined by over 64% during the period. We show that increased cigarette prices and health shocks together contribute almost equally to explain nearly 86% of the decline, with little that can be attributed to smoking bans and anti-smoking sentiment.

     

CIGARETTE TAXATION AND DEMAND: AN EMPIRICAL MODEL

This paper evaluates the impact of taxation on cigarette consumption, using a recursive model that includes a retail price equation and a dynamic demand equation. The analysis is based on panel data for 11 western states over the period 1967–1990. Results indicate that cigarette consumption is price-sensitive, with a demand elasticity of –0.40 in the short run and –0.48 in the long run. A tax increase, such as that imposed in California in January 1989, can have a strong effect of reducing cigarette consumption by between 11.2 percent in the short run and 13.4 percent in the long run. These results support the theory of rational addiction and the hypothesis that, as a part of their oligopoly behavior, the tobacco companies often do raise end-market prices by more than the amount of the increase in tax rates .     

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 )     

Information shocks and cigarette addiction: views from dynamic panels with common structural changes

In this article we attempt to evaluate the impact of various information shocks on cigarette consumption. In contrast to the existing studies, we do not impose any break points a priori. We use recently developed techniques for sample splitting in the data on US cigarette demand, and find that using a time index as a transition variable can cluster cigarette demand into four distinct regimes. In the past four decades a myopic-to-rational switch in cigarette consumption behaviour was observed in response to various anti-smoking information events. In particular, we find strong evidence in support of the rational addiction model in the 1980s and 1990s. Moreover, in line with the theoretical prediction, our estimate of the long-run elasticity is twice as large as the short-run elasticity. Our empirical framework should improve policy makers' understanding of the dynamics of cigarette consumption in response to various anti-smoking campaigns, and stress the role of sound policy making in improving smoking control measures.