Prevalence and substitution effects in tobacco consumption: A discrete choice analysis of panel data
AbstractThis paper analyzes tobacco demand within a discrete choice framework. Using binomial and multinomial logit models with random effects, and an unbalanced panel data set of Norwegian households over a twenty year period, we first consider the decisions a) whether to smoke or not, and b) given the choice is to smoke, whether to smoke hand rolled or manufactured cigarettes. Next, we consider a multinomial logit framework, in which the households choose between no tobacco, only manufactured cigarettes, only hand rolled cigarettes, and a combination of manufactured and hand rolled cigarettes. In this process, we utilize the potential offered by panel data to investigate unobserved heterogeneity, which is crucial for commodities where consumers have different tastes and where users tend to become addicted. Using Maximum Likelihood in combination with bootstrap estimation of standard errors, we find that income and prices influence the 'type of tobacco choice probabilities' at least as strongly as the 'smoking/non-smoking probabilities'. Cet.par., an increase in the price of manufactured cigarettes could lead consumers to switch to hand rolled cigarettes, rather than quit smoking. Socio-demographic variables seem to be at least as important in explaining the discrete aspects of tobacco consumption as income and prices. Finally, we find significant unobserved household specific effects in the smoking pattern.
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Bibliographic InfoPaper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number C4-3.
Date of creation: Mar 2002
Date of revision:
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Tobacco. Discrete choice. Panel data. Logit analysis. Heterogeneity. Bootstrapping;
Other versions of this item:
- Knut R. Wangen & Erik Biørn, 2001. "Prevalence and substitution effects in tobacco consumption: A discrete choice analysis of panel data," Discussion Papers 312, Research Department of Statistics Norway.
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-07-04 (All new papers)
- NEP-DCM-2002-07-04 (Discrete Choice Models)
- NEP-HEA-2002-07-04 (Health Economics)
- NEP-MIC-2002-07-05 (Microeconomics)
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