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

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  • Esteban Petruzzello

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.

Suggested Citation

  • Esteban Petruzzello, 2019. "Testing for forward-looking behaviour: evidence from the enactment of smoking restrictions," Applied Economics, Taylor & Francis Journals, vol. 51(19), pages 2061-2069, April.
    • Handle: RePEc:taf:applec:v:51:y:2019:i:19:p:2061-2069
    DOI: 10.1080/00036846.2018.1540845
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    Cited by:

    1. Paul Heidhues & Botond Koszegi & Philipp Strack, 2023. "Misinterpreting Yourself," Cowles Foundation Discussion Papers 2378, Cowles Foundation for Research in Economics, Yale University.
    2. Esteban Petruzzello, 2019. "Measuring the Effect of Policy on the Demand for Menthol Cigarettes: Evidence from Household-Level Purchase Data," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 45(3), pages 422-445, June.

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