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.     

On generic vs. brand promotion of farm products in foreign markets

Farm groups and their governments spend millions of dollars each year advertising agricultural products in international markets. Intuitively, country-of-origin or ‘brand’ advertising should be more profitable than generic advertising in that it enhances product differentiation and reduces free riding. However, unlike generic advertising, brand advertising decreases the demand for competing imports and lowers their prices when supplies are upward sloping. In addition to inviting retaliation, the decline in the prices of competing products erodes the price of the advertised product through second-round or ‘market feedback’ effects. In this study, we develop a generalized model for assessing the relative effectiveness of generic and brand promotion in the international market when products are differentiated by source origin and supplies are uncontrolled. Applying the model to US beef promotion in Japan, we find that when brand and generic advertising are equally efficient in the sense that they cause equivalent horizontal shifts in the group and product-specific demand curves, generic advertising is indeed more profitable for most of the relevant parameter space. Distributional analysis suggests that, with equal export supply elasticities, the gross benefits of generic advertising are distributed across exporters in proportion to the expenditure elasticities for the products in question.     

Filter Tests of U.K. Share Prices

The purpose of this paper is to develop and test a model of the promotional expenditure decision for a firm operating under conditions of combined uncertainty and oligopoly. The uncertainty is assumed to exist in respect of the impact of any particular level of promotional expenditure upon the demand conditions facing the firm.

The analysis forms part of a wider study of advertising by confectionery manufacturers and arose largely as a result of conversations with advertising executives in the confectionery market. In the course of these discussions it became clear that the existing body of theory concerning the promotional expenditure decision is almost completely incapable of accommodating the extensive uncertainty which is an integral part of the promotional decision in a market such as that under consideration. It also became clear (at least in the case of the confectionery market) (a) that decision makers regard the pricing and promotional expenditure decisions as being largely independent and (b) that in a large number of cases decision makers think in terms of a minimum or ‘threshold’ level of promotional expenditure. While these factors are predominantly in the nature of impressionistic informal observations and therefore of doubtful validity as bases for a scientific enquiry, it was nonetheless felt worthwhile to attempt to develop a theoretical framework capable of accommodating them.

While exhibiting considerable indeterminacy, the model developed below at least takes explicit cognisance of risk and uncertainty. It is also formulated in such a way that the promotional and pricing decisions are independent. It is rather remarkable and most encouraging that the analysis appears to predict something closely akin to minimum ‘threshold’ levels of advertising expenditure. Our theoretical exercise might therefore be afforded the minimal justification of providing a framework capable of accommodating the various results of introspection and conversational empiricism.     

Smokeless tobacco,smoking cessation and harm reduction: an economic analysis

Good estimates place ‘hard core’ smoking rates in the United States at approximately 25%, with little change over the decade of the 1990s. This paper examines the possibilities of ‘harm reduction’ with the use of smokeless tobacco. Specifically, using an econometric model we seek to determine whether an increase in the use of smokeless tobacco would lead to reduced smoking rates in the United States. Applying our model to the NHANES III (National Health and Nutrition Examination Survey) we find that the use of smokeless tobacco by an average U.S. male smoker would increase the average probability of smoke cessation by over 10%. Approximately 3 million additional ‘quits’ would result for 26 million smokers. Our study permits an examination of cessation by age groups and we find that males who use smokeless tobacco between 16 and 65 have a 10–14% probability of quitting but that the probability falls beyond age 66. Important implications for life extension and health costs would attend these results with, under conservative assumptions, life years saved approximating 2.16 million and health care cost-savings of about $3 billion per year.     

Advertising in consumer allocation models: choice of functional form

This study investigates the empirical performance of four different functional forms for advertising-augmented consumer allocation models. The investigation is carried out within the context of the UK alcoholic drinks markets. The aims of the study are twofold: (i) to assess which of the four functional forms provides the best explanation of the data and may serve, therefore, as the most suitable framework for investigating advertising effects in these markets; and (ii) to consider whether the findings with regard to advertising effects are robust and consistent across model specifications. Advertising is found to have had no significant effect upon the ‘product composition’ or ‘level’ of total alcoholic drink consumption in the UK over the period from 1964 to 1996, and this result is robust with respect to variations in the specification of functional form. The consumption of alcoholic drink is affected by relative prices, total consumer budgeted expenditures and, to some extent, by autonomous shifts in tastes. The balance of the evidence from tests for functional form appeared to favour the Almost Ideal Demand system as a framework for investigating the influence of advertising and other factors on drink consumption.     

The role of pregnancy health problems on maternal smoking behaviours

To explore the effects of pregnancy health problems (PHPs) on smoking behaviours during and after pregnancy (‘smoking-inducing’ effect), we estimate a two-period model that jointly determines prenatal and postnatal smoking decisions, taking into consideration the presence of PHPs. While PHPs are likely to reduce prenatal (except for heavy smokers) and postnatal smoking propensity, we still observe considerable postnatal relapse in the sample, which can be attributed to smoking addiction, as well as information asymmetries and maternal stress associated with PHPs. Thus, we advocate for smoking cessation policies and programmes throughout and beyond pregnancy to avoid potential intertemporal substitution between prenatal and postnatal cigarette consumption.     

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.     

Two separated effects of employer-provided health insurance on job mobility

We estimate the effect of employer-provided health insurance (EPHI) on job mobility via a dynamic model of joint employment and health insurance decision in the presence of uncertainty about wage rate and health status transitions. The model is based on a Markov decision process in which a hedonic wage approach provides an economic rationale for the different choices and health insurance serves as an input to the health production process. Including health transitions in the model helps us to understand how the availability of EPHI (positive job characteristic) and holding EPHI (the wage-health insurance trade-off) enter into the individuals’ decisions. The model is estimated using the 1999–2000 Medical Expenditure Panel Survey panel 4, and the results show that the ‘pure’ effects of holding EPHI are negligible, the ‘full’ effects of EPHI are significant and the degrees of the inefficiency vary between 14% and 25% across different states.     

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)     

Spatial and economic patterns in life expectancy among US States

This study investigates the determinants of gender-specific life expectancy across US states over the period 1995–2007. We employ a production function specification where life expectancy depends on health expenditure, income, education and lifestyle variables, allowing for spatial effects. Empirical results suggest that education attainment and health expenditure are the main factors behind improving longevity, whereas smoking bears a strong negative influence. For robustness purposes, we also use health spending as well as education criteria, apart from geographical ones to model interstate spillovers. In the former case, states with similar health expenditure are ‘neighbors’ and affect positively the life expectancy process. If education is applied instead of health spending together with geographic proximity, the spatial correlation is insignificant, i.e. education ‘neighbors’ do not affect life expectancy. Our findings do not imply significant gender differences regarding health production. The results suggest that health care policy will have to focus on wider economic and social considerations, like education and lifestyle changes, except medical care provision in order to exploit the full potential for life expectancy improvements of the US population.     

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.     

Advertising and US alcoholic beverage demand: system-wide estimates

The effects of advertising on consumption of alcoholic beverages in the US are analysed. The goal is to obtain evidence on the importance of advertising at the level of beverage demand(beer, wine, spirits) and for total consumption of alcohol (per capita gallons of ethanol). A three-equation conditional demand system is estimated that includes own- and cros-beverage advertising as explanatory variables. Four models of the differential demand system are estimated, including the Rotterdam, AID, CBS, and NBR models, using annual US data for the period 1964-90 on beverage consumption, prices, expednitures, and real advertising. Estimates are obtained of the complete matrix of own- and cross-elascities for each beverage’ price and advertising. At the beverage level, the results indicate a positive butr very small effect of advertising on beverage consumption, with most of the impact due to wine advertising and non due to beer advertising. There is no efect of advertising in the composite demand function for alcohol. Hence, the results from system-wide modelling suggest that alcohol advertising serves to reallocate brand sales, with no effect on total ethanol consumption and very small effects on beverage consumption.     

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.

     

Economic Growth,Terms of Trade and Welfare in an Open Monetary Economy*

The authors investigate the impact of growth on terms of trade, absolute prices and welfare using a two-country, monetary model. Under flexible exchange rates export-biased growth would lead to a decline in the terms of trade if the two countries are ‘similar’. Under fixed exchange rates a weaker condition than the barter condition of export-biased growth is sufficient, namely, for the import commodity the demand creating effect of growth dominates the supply effect while for the exported commodity the opposite holds. Secondly, substitutability between money and commodities indicates that no necessary relation holds between the terms of trade and the trade balance. Thirdly, the introduction of money creates a real balance effect so that decline in terms of trade is no longer a necessary (or sufficient) condition for immiserization. Finally, the paper concludes by questioning two policy conclusions drawn in earlier models: one, that the declining terms of trade of less developed countries was due to a bias in the growth strategy and, two, that monetary models of trade support the ‘monetarist’ proposition that growth and a deteriorating trade balance can only co-exist if the domestic monetary policy is nonneutral.     

Management Behaviour in Vietnamese Commercial Banks

This study identifies managerial behaviour in Vietnamese banks between the years 2000 and 2014, based on the managerial framework of banks, as identified by Rossi et al. ( 2009 ). This framework is built on the interrelationships between efficiency, risk, capital and diversification. This study uses the Z‐score to measure insolvency risk, the SFA to estimate cost efficiency, the ratio of total equity to total assets to capture bank capital and the HHI index to measure the diversification of revenue and earning assets. The results from the 3SLS estimator indicate that revenue diversification has an insignificant impact on insolvency risk, capital ratio and cost efficiency, but earning assets diversification has a negative effect on these three variables, supporting ‘classical diversification’, ‘economic capital’ and ‘monitoring’ behaviours. Moreover, a decline in cost efficiency leads to a rise in insolvency risk, implying ‘bad management’ behaviour; an increase in risk results in a reduction in cost efficiency, indicating ‘bad luck’ behaviour; and a reduction in capital ratio in the poorly capitalised banks leads to a growth in risk, suggesting ‘moral hazard’ behaviour. The results remain strongly robust when using an alternative risk measurement (the loan loss provision ratio) and an alternative SFA model.     

TV advertising spillovers and demand for private labels: the case of carbonated soft drinks

The expansion of private labels, or store brands, has transformed consumer choice sets and competition in retail markets, prompting manufacturers to fight back with renewed pricing and product and promotion strategies to forestall further private label expansion. This article examines the spillover effects of television advertising on brand-level consumer demand for carbonated soft drinks (CSDs), including private labels, using a random coefficients logit model with household purchasing and advertising viewing Nielsen data. As in previous work, we find that although brand spillover effects significantly increase demand for CSD brands in the same company and undermine demand facing other manufacturers’ CSD brands, surprisingly, there are positive spillover effects on the demand for private label brands. This indicates that brand advertising is persuasive with respect to manufacturers’ brands but complementary with respect to private labels. Further results show that eliminating television advertising for CSDs would lower aggregate CSD sales as consumers migrate to other beverages, although private labels stand to gain, particularly Wal-Mart brands.     

Monetary Policy and Financial Stability: The Role of Inflation Targeting

This article examines the relationship between Inflation targeting (IT) and financial instability from 1990 to 2015 for Asian economies. To measure financial instability, a multidimensional financial conditioning index is calculated following the ECB's approach. Using a fixed effects panel data model the study finds that adoption of IT policy in Asian economies has an adverse impact on financial stability, thus rejecting the ‘conventional wisdom’ hypothesis. Further, the Vector Autoregression (VAR) result shows that an IT regime increases housing returns and encourages investors to take higher risks.     

Measuring economic freedom: an alternative functional specification and subsequent ranking

ABSTRACT

The widely cited Economic Freedom of the World index is an aggregate measure of economic freedom calculated by using a simple arithmetic mean of scores over five sub-dimensions: (1) size of government, (2) legal structure and security of property rights, (3) access to sound money, (4) freedom to trade internationally and (5) regulation of credit, labour and business. The use of a simple arithmetic mean implicitly assumes that the different sub-dimensions are ‘perfect substitutes’. To explore the implications of this assumption, we compute an aggregate economic freedom score and ordinal ranking of countries, by taking a geometric mean of the five sub-dimensions. For this alternative specification, the marginal impact of each sub-dimension on the aggregate score is no longer independent of the other sub-dimension scores. Consequently, countries with inconsistent levels of economic freedom across sub-dimensions are ‘punished’ to a greater degree than are countries with less variability across sub-dimensions. Our alternative specification results in considerable movement in terms of country rankings. The geometric mean measure does not appear to explain economic growth as well as the arithmetic mean measure.     

ADVERTISING RESTRICTIONS AND CIGARETTE SMOKING: EVIDENCE FROM MYOPIC AND RATIONAL ADDICTION MODELS

Because of the high social cost of cigarette smoking, many countries impose advertising restrictions to reduce cigarette consumption. Yet previous studies conclude that advertising constraints have been ineffective at reducing cigarette smoking. This conclusion is incorrect because it ignores the fact that advertising restrictions have supply as well as demand effects. The authors extend existing research by showing that advertising regulations, especially those found in the recent National Tobacco Settlement, have decreased the equilibrium level of cigarette consumption in the United States, a result that holds for both myopic and rational addiction models. (JEL L50, L66, M37 )     

A factor analysis approach to measure the biased effects of retail fruit juice advertising

This study presents a structural factor analysis approach to measure the impact of advertising on consumer demand. It is assumed that advertising affects the latent perception of consumers, which in turn influences their purchasing behavior. This study investigates the relationship between consumer purchases and retail store advertising (i.e., newspaper advertising, in-store display, and point-of-purchase display) of three fruit juices using an extended Rotterdam model. The results show that the demand for orange juice and grapefruit juice was affected by their own advertising, while the demand for apple juice was only affected by advertising of competitive juices.The authors are a Senior Econometrician, TRS Risk Management, American Express Company; and a Research Economist, Florida Department of Citrus, and Adjunct Professor, Food and Resource Economics Department, University of Florida, respectively.The authors thank B. Dixon, A. Reynolds, S. Shonkwiler, H. Theil, K. Young, editor, and other anonymous reviewers for comments and suggestions. The usual disclaimer applies. This study was partially supported by the McKethan-Matherly Eminent Scholar Chair at the University of Florida.