This 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.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number
312.
Find related papers by JEL classification: C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Frank J. Chaloupka & Kenneth E. Warner, 1999.
"The Economics of Smoking,"
NBER Working Papers
7047, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Chaloupka, Frank J. & Warner, Kenneth E., 2000.
"The economics of smoking,"
Handbook of Health Economics,
in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 29, pages 1539-1627
Elsevier.
[Downloadable!] (restricted)
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)