Abstracts for National Bureau of Economic Research Tobacco-Related Working Papers

           W7047 Frank J. Chaloupka, Kenneth E. Warner. The Economics of Smoking. March, 1999. PDF (312 K) format. http://nberws.nber.org/papers/W7047

           While the tobacco industry is among the most substantial and successful economic enterprises, tobacco consumption kills more people than any other product. Economic analysis of tobacco product markets, particularly for cigarettes, has contributed considerable insight to debates about the industry's importance and appropriate public policy roles in grappling with health consequences of tobacco. The most significant example is the rapidly expanding and increasingly sophisticated body of research on the effects of price increases on cigarette consumption. Because excise tax is a component of price, the resultant literature has been prominent in legislative debates about taxation as a tool to discourage smoking, and has contributed theory and empirical evidence to the growing interest in modeling demand for addictive products. This chapter examines the research and several equity and efficiency concerns accompanying cigarette taxation debates. It includes economic analysis of other tobacco control policies, such as advertising restrictions, prominent in tobacco control debates. Research addressing the validity of tobacco-industry arguments that its contributions to employment, tax revenues, and trade balances are vital to economic health in states and nations is also considered, as it is the industry's principal weapon in the battle against policy measures to reduce tobacco consumption.

          W6958 Henry Saffer, Frank Chaloupka. Tobacco Advertising: Economic Theory and International Evidence. Feb, 1999. PDF (1276 K) format. http://nberws.nber.org/papers/W6958

          Tobacco advertising is a public health issue if these activities increase smoking. Although public health advocates assert that tobacco advertising does increase smoking, there is significant empirical literature that finds little or no effect of tobacco advertising on smoking. In this paper, these prior studies are examined more closely with several important insights emerging from this analysis. This paper also provides new empirical evidence on the effect of tobacco advertising. The primary conclusion of this research is that a comprehensive set of tobacco advertising bans can reduce tobacco consumption and that a limited set of tobacco advertising bans will have little of no effect. The regression results indicate that a comprehensive set of tobacco advertising bans can reduce consumption by 6.3 percent. The regression results also indicate that the new European Commission directive tobacco advertising in the EC countries, will reduce tobacco consumption by about 6.9 percent on average in the EC. The regression results also indicate that the ban on outdoor advertising included in the US tobacco industry state level settlement will probably not result in much change in advertising expenditures nor in tobacco use. Under the settlement industry would also contribute $1.5 billion over five years for public education on tobacco use. This counteradvertising could reduce tobacco use by about two percent.

          W6939 Frank J. Chaloupka, Rosalie Liccardo Pacula, Matthew C. Farrelly, Lloyd D. Johnston, Patrick M. O'Malley. Do Higher Cigarette Prices Encourage Youth to Use Marijuana? Feb, 1999. PDF (127 K) format. http://nberws.nber.org/papers/W6939

           Every major national tobacco legislation proposed in the past two years has called for significant increases in the price of cigarettes as a way to discourage youths from smoking. One argument used to oppose these bills is that increases in the price of cigarettes would cause youths to substitute marijuana for cigarettes. Although it has long been believed that cigarettes are a gateway drug,' no economic research has been done to determine whether cigarettes and marijuana are economic complements or substitutes. This paper begins to fill the void in the current research by examining the contemporaneous relationship between the demands for cigarettes and marijuana among a nationally representative sample of 8th, 10th and 12th graders from the 1992-1994 Monitoring the Future Project. Two part models are used to estimate reduced form demand equations. Examination of the cross-price effects clearly shows that higher cigarette prices will not increase marijuana use among youths. In addition to reducing youth smoking, we find that higher cigarette prices significantly reduce the average level of marijuana used by current users. Cigarette prices also have a negative effect on the probability of using marijuana findings are not significant at conventional levels.

          W6937 John A. Tauras, Frank J. Chaloupka. Price, Clean Indoor Air, and Cigarette Smoking: Evidence from the Longitudinal Data for Young Adults. Feb, 1999. PDF (1327 K) format. http://nberws.nber.org/papers/W6937

          The upward trend in cigarette smoking among teenagers throughout the 1990's has spurred a great deal of interest on how to discourage young people from smoking. This paper attempts to inform policy makers by providing evidence on the effects cigarette prices (which can be increased through cigarette excise taxes) and restrictions on smoking in public places and private worksites have on the use of cigarettes by young adults. Data on cigarette use are taken from the 1976 through 1993 surveys of high school seniors as part of the Monitoring the Future program. Seven follow-ups are conducted on each senior class and therefore each individual is sampled up to eight times. Site-specific data on cigarette prices and clean indoor air laws are added to the survey data. Individual fixed effects methods are used to estimate smoking participation and conditional demand equations. The results indicate that increases in cigarette prices would lead to significant reductions in both the number of people smoking and the frequency with which individuals smoke. The estimated overall average price elasticity of demand is -0.791. In addition, restrictions on smoking in public places and private worksites are found to be effective in reducing both the intensity and the propensity to smoke.

          W6541 Frank J. Chaloupka, Rosalie Liccardo Pacula. An Examination of Gender and Race Differences in Youth Smoking Responsiveness to Price and Tobacco Control Policies. April, 1998. PDF (103 K) format. http://nberws.nber.org/papers/W6541

          Nationally representative studies consistently report significant gender and racial differences in youth smoking rates, although little research has been done to explain why. In this paper we examine one possible source for this variation: differences in youth responsiveness to changes in price or tobacco control policies. Using data from the 1992-1994 Monitoring the Future surveys, we find that young men are much more responsive to changes in the price of cigarettes than young women. The participation elasticity for men is almost twice as large as that for women. Further, we find that smoking rates of young black men are significantly more responsive to changes in price than young white men. In addition, we find significant differences in responsiveness to particular tobacco control policies. Smoking rates among white youths are responsive to anti-tobacco activities and clean indoor air restrictions, while smoking rates among black youths are significantly influenced by smoker protection laws and restrictions on youth access.

          W6486 Robert L. Ohsfeldt, Raymond G. Boyle, Eli L. Capilouto. Tobacco Taxes, Smoking Restrictions, and Tobacco Use. March 1998. PDF (875 K) format. http://nberws.nber.org/papers/W6486

          Tobacco researchers have focused considerable attention on the evaluation of various mechanisms to control cigarette use, including regulation of economic availability through increases in cigarette excise taxes. In contrast, the effects of mechanisms to control the availability of ST product on ST use have not been as extensively studied. This paper presents estimates of the effects of tobacco excise taxes and laws restricting public smoking on the likelihood of current use of different forms of tobacco (moist snuff and cigarettes) obtained from tobacco use data in the Current Population Surveys (CPS) for Sep 1992, January 1993, and May 1993. The full sample is restricted to males age 16 or older who self identify as either white or black (i.e., other' is excluded), which yields a usable sample of 165,653 individuals. This large sample is particularly useful given the relative rarity of self-reported snuff use (about 18% of those in the sample report current use but only 1.2% report current snuff use). The results indicate that individuals living in areas with higher snuff tax rates are to be less likely to use snuff. A 1% increase in the snuff tax rate is estimated to reduce the probability of snuff use by -0.10%. Consistent with numerous prior studies, individuals in areas with higher cigarette ta rates are less likely to smoke cigarettes. In terms of cross-tax effects, higher cigarette tax rates are associated with a higher probability of snuff use. This is consistent with substitution of snuff for cigarettes when the price of cigarettes increases relative to the price of snuff. However, higher snuff tax rates are not associated with greater cigarette use. Finally, laws restricting smoking in workplaces or other public places appear to discourage both cigarette and snuff use, though less consistently so for snuff.

          W6444 Warren K. Bickel, Gregory J. Madden. The Behavioral Economics of Smoking. March 1998. PDF (2191 K) format. http://nberws.nber.org/papers/W6444

          Evidence that economic principles may be employed to predict the rates at which cigarettes are consumed is presented from several laboratory experiments. In these experiments, cigarette-deprived smokers were required to make a effortful response to earn cigarette puffs. Changing the number of responses required per puff is conceptualized as a price manipulation. Our experiments show that these price increases decrease cigarette consumption and that price elasticity of demand increases with increases in price. When from 74 different smokers, participating in 17 different experiments, in our laboratory were analyzed, five demographic variables were related to rates of earning and smoking cigarettes in the lab: 1) males smoked more than females; 2) less-educated individuals tended to smoke more than better-educated smokers; 3) higher rates of smoking were observed in individuals with high Fagerstr”m smoke more than heavy drinkers; and 5) unemployed subjects smoked more than employed individuals. Demographic effects on price elasticity did not accord as well with econometric data. Finally, we discuss the ability of behavioral-economic laboratory experiments to model cigarette smoking in the natural economy, and the validity of using these laboratory results as a means of assessing the likely effects of public-policy initiatives. The results from one such experiment are presented that suggest the economic concept of inferior goods may be informative in understanding nicotine-replacement products and the likely effects of differential pricing of cigarettes and these replacement products.

          W5998 William N. Evans, Jeanne S. Ringel. Can Higher Cigarette Taxes Improve Birth Outcomes? April 1997. PDF (1541 K) format. http://nberws.nber.org/papers/W5998

          This study uses within-state variation in taxes over the 1989-1992 time period to test whether maternal smoking and birth outcomes are responsive to higher state cigarette taxes. Data on the outcomes of interest are taken from the Natality Detail files, generating a sample of roughly 10.5 million births. The results indicate that smoking participation declines when excise taxes are increased. The elasticity of demand for cigarettes is estimated to be approximately -0.25. In addition, estimates of two-part models suggest that taxes only alter the probability a mother smokes and not average daily consumption conditional on smoking. Reduced-form models also indicate that higher excise taxes translate into higher birth weights. These two sets of results can be used to form an instrumental variables estimate of the impact of smoking on birth weight. This estimate indicates that maternal smoking reduces average birth weight by 367 grams, which is remarkably close to estimates from random assignment clinical trials. It is important to note that as a policy tool to improve birth outcomes, cigarette taxes are a blunt instrument. Taxes will be imposed on all smokers, but the benefits received and costs imposed extend beyond the targeted population. Under the naive assumption that the only benefits of the tax are received in the form of improved birth outcomes, we find that an increase in the cigarette tax is not as cost effective in preventing low birth weight as other more targeted public policies such as the Medicaid expansions of the late 1980's.

          W5740 Frank J. Chaloupka, Michael Grossman. Price, Tobacco Control Policies and Youth Smoking. Sep 1996. PDF (1635 K) or (1541 K) format. http://nberws.nber.org/papers/W5740

          This paper examines effectiveness of several tobacco control policies in discouraging cigarette smoking among youths. These policies include increased cigarette excise taxes (which result in higher cigarette prices), restrictions on smoking in public places and at private worksites, and limits on the availability of tobacco products to youths. The data employed in this research are taken from the 1992, 1993, and 1994 surveys of eighth, tenth, and twelfth grade students conducted by the University of Michigan's Institute for Social Research as part of the Monitoring the Future Project. Site specific cigarette prices and measures of tobacco related policies are added to the survey data. The results indicate that tobacco control policies can be effective in reducing youth cigarette smoking. The average overall estimated price elasticity of youth cigarette demand of 1.313 indicates that large increases in cigarette excise taxes would lead to sharp reductions in youth smoking. Similarly, strong restrictions on smoking in public places would reduce the prevalence of smoking among youths, while limits on smoking in schools would reduce average cigarette consumption among young smokers. However, limits on youth access to tobacco products appear to have little impact on youth cigarette smoking. This is most likely the result of the relatively weak enforcement of these laws.

          W5567 William N. Evans, Matthew C. Farrelly, Edward Montgomery. Do Workplace Smoking Bans Reduce Smoking? May 1996. PDF (1943 K) format. http://nberws.nber.org/papers/W5567

          In recent years there has been a heightened public concern over the potentially harmful effects of environmental tobacco smoke (ETS). In response, smoking has been banned on many jobs. Using data from the 1991 and 1993 National Health Interview Survey and smoking supplements to the Sep 1992 and May 1993 Current Population Survey, we investigate whether these workplace policies reduce smoking prevalence and smoking intensity among workers. Our estimates suggest that workplace bans reduce smoking prevalence by 5 percentage points and average daily consumption among smokers by 10 percent. The impact of the ban is greatest for those with longer work weeks. Although workers with better health habits are more likely to work at establishments with workplace smoking bans, estimates from bivariate probit and two-stage least square equations suggest that these estimates are not subject to an omitted variables bias. The rapid increase in workplace bans can explain all of the recent sharp fall in smoking among workers relative to non-workers.

          W5524 Frank J. Chaloupka, Michael Grossman, John A. Tauras. Public Policy and Youth Smokeless Tobacco Use. April 1996. PDF (1060 K) format. http://nberws.nber.org/papers/W5524

          While much is known about the effects of prices and tobacco control policies on cigarette smoking, relatively little is known about their impact on smokeless tobacco use. This paper addresses these issues using data on smokeless tobacco use by adolescent males taken from the 1992, 1993, and 1994 Monitoring the Future Surveys. Site-specific smokeless tobacco tax data and several measures of limits on youth access to tobacco products are added to the survey data. Ordered probit methods are used to examine the impact of prices and tobacco control policies on the frequency of smokeless tobacco use among young males. Comparable two-part models are estimated for participation in smokeless tobacco use and for conditional smokeless tobacco demand. The estimates indicate that increases in smokeless tobacco taxes would lead to significant reductions in both the number of young men using smokeless tobacco and in the frequency of smokeless tobacco use. The average estimated price elasticity of smokeless tobacco participation for adolescent males is -0.40, while the overall average estimated price elasticity of demand is -0.65. In addition, strong limits on youth access to smokeless tobacco products are found to be effective in reducing both participation in smokeless tobacco use and the frequency of smokeless tobacco use by young males.

          W5270 Phillip B. Levine, Tara A. Gustafson, Ann D. Velenchik. More Bad News for Smokers? The Effects of Cigarette Smoking on Labor Market Outcomes. Sep 1995. PDF (1041 K) format. http://nberws.nber.org/papers/W5270

          This paper uses data from the National Longitudinal Survey of Youth to examine the effect of smoking on wages and employment. The panel nature and household structure of these data enable us to implement methods to account for differences in observed and unobserved individual characteristics that may be correlated with both smoking and wages. Changes in wages associated with changes in smoking behavior and models that utilize sibling comparisons are estimated to address the potential heterogeneity problem. Estimates from alternative specifications all indicate that smoking reduces wages by roughly 4-8%. No robust, statistically significant effect on employment is observed.

          W5153 Michael J. Moore. Death and Tobacco Taxes. June 1995. PDF (812 K) format. http://nberws.nber.org/papers/W5153

          This study analyzes the effects of tobacco excise tax changes on mortality due to heart disease, cancer, and asthma. Reduced form regressions of mortality rates on tax data for the years 1954-1988, with controls for state, year, income, and unobserved persistence, indicate that tax increases lead to statistically significant decreases in mortality. A 10% increase in the tax is projected to save approximately 5200 lives a year.

          W5012 Frank J. Chaloupka, Henry Wechsler. Price, Tobacco Control Policies and Smoking Among Young Adults. Feb 1995. PDF (1842 K) format. http://nberws.nber.org/papers/W5012

          The effects of cigarette prices and tobacco control policies (including restrictions on smoking in public places and limits on the availability of tobacco products to youths) on cigarette smoking among youths and young adults are estimated using data from a nationally representative survey of students in U.S. colleges and universities. Smoking participation rates, the quantity of cigarettes smoked by smokers, and level of smoking equations are estimated using appropriate econometric methods. The estimates indicate that college students are quite sensitive to the price of cigarettes, with an average estimated price elasticity of smoking participation of -0.66 and an overall average estimated price elasticity of cigarette smoking of -1.43. In addition, relatively stringent restrictions on smoking in public places are found to reduce smoking participation rates among college students, while the quantity of cigarettes consumed by smokers is lowered by any restrictions on public smoking. Finally, limits on the availability of tobacco products to underage youths have no impact on college students, almost all of whom can legally purchase these products.

          W4949 William N. Evans, Edward Montgomery. Education and Health: Where There's Smoke There's an Instrument. Dec 1994. PDF (2042 K) format. http://nberws.nber.org/papers/W4949

          Victor Fuchs has suggested that the persistent positive correlation between education and health habits can be explained by interpersonal differences in the discount rate. If Fuchs is correct, some health habits can be used as instruments for education in standard wage equations. We use whether an individual smoked at age 18 in such a fashion. The instrument is strongly correlated with years of education, and IV estimates of the return to schooling are 10 percent larger than the OLS estimates. We fail to reject tests of overidentifying restrictions, show how the smoking/education link varies systematically across age cohorts and income groups, and demonstrate that the instrument is correlated with other intertemporal decisions such as home ownership. The results are replicated in four additional data sets, and for both males and females.

          W4891 W. Kip Viscusi. Cigarette Taxation and the Social Consequences of Smoking. Oct 1994. PDF (2555 K) format. http://nberws.nber.org/papers/W4891

          This paper assesses the appropriate cigarette tax needed to address potential market failures. There is no evidence of inadequate risk decisions by smokers regarding their own welfare. Detailed calculations of the financial externalities of smoking indicate that the financial savings from premature mortality in terms of lower nursing home costs and retirement pensions exceed the higher medical care and life insurance costs generated. The costs of environmental tobacco smoke are highly uncertain, but of potentially substantial magnitude. Even with recognition of these costs, current cigarette taxes exceed the magnitude of the estimated net externalities.

          W4803 Jeffrey E. Harris. A Working Model for Predicting the Consumption and Revenue Impacts of Large Increases in the U.S. Federal Cigarette Excise Tax. July 1994. http://nberws.nber.org/papers/W4803

          This report describes an easily computable model of the relation between cigarette prices and cigarette consumption in the United States. The model is used to predict the revenue impacts of Federal excise tax hikes ranging from $0.45 to $1.76 per pack.

          W3322 Gary S. Becker, Michael Grossman, Kevin M. Murphy. An Empirical Analysis of Cigarette Addiction. August 1994. PDF (1552 K) format. 84 Am Economic Rev (3) 396-418 (June 1994). http://nberws.nber.org/papers/W3322

          W3268 Frank J. Chaloupka, Rational Addictive Behavior and Cigarette Smoking. Dec 1991. PDF (1622 K) format. 99 J Political Economy (4) 722-742 (Aug 1991). http://nberws.nber.org/papers/W3268

          W3267 Frank J. Chaloupka. Men, Women, and Addiction: The Case of Cigarette Smoking. Feb 1990. PDF (1058 K) format. http://nberws.nber.org/papers/W3267

          W3082 Michael Grossman. Health Benefits of Increases in Alcohol and Cigarette Taxes. June 1990. http://nberws.nber.org/papers/W3082

          84 Brit J Addiction (10) 1193-1204 (Oct 1989)

          W2663 Frank J. Chaloupka, Henry Saffer. The Demand For Cigarettes and Restrictions on Smoking in the Workplace. July 1988. "Clean Indoor Air Laws and the Demand for Cigarettes." X Contemporary Policy Issues (2) 72-83. (April 1992) . http://nberws.nber.org/papers/W2663

          W0768 Phillip Farrell, Victor R. Fuchs. Schooling and Health: The Cigarette Connection. April 1983. "Schooling and Health: The Cigarette Connection." 1 J Health Economics (3) 217-230 (Dec 1982). http://nberws.nber.org/papers/W0768

          W0764 Eugene M. Lewit, Douglas Coate. The Potential for Using Excise Taxes to Reduce Smoking. January 1983. "The Potential for Using Excise Taxes to Reduce Smoking." 1 J Health Economics (2) 121-145 (1982). http://nberws.nber.org/papers/W0764

          W0655 Lewit, Eugene M.; Coate, Douglas; and Grossman, Michael. "The Effects of Government Regulation on Teenage Smoking." XXIV J Law and Economics (3) 273-298 (Dec 1981 or March 1982). http://nberws.nber.org/papers/W0655