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

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Abstract

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.

Original languageEnglish (US)
Pages (from-to)2061-2069
Number of pages9
JournalApplied Economics
Volume51
Issue number19
DOIs
StatePublished - Apr 21 2019

Keywords

  • addiction
  • cigarette taxes
  • Forward-looking behavior
  • public smoking restrictions

ASJC Scopus subject areas

  • Economics and Econometrics

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