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How Do Private Markets Address Smoking Externalities?


  • Amelia Biehl

    (University of Michigan-Flint)

  • Christopher C. Douglas

    (University of Michigan-Flint)


We survey bars and restaurants in Genesee County, Michigan to examine how, absent a smoking ban, different establishments accommodate smokers and nonsmokers. We find evidence that smokers and nonsmokers are systematically accommodated. The majority of establishments without bars voluntarily ban smoking, and the majority of establishments with bars restrict smoking to a separate room or to the bar area. This pattern of accommodation is consistent with what the Coase Theorem would predict when dealing with the externalities created by secondhand smoke.

Suggested Citation

  • Amelia Biehl & Christopher C. Douglas, 2011. "How Do Private Markets Address Smoking Externalities?," Journal of Economic Insight (formerly the Journal of Economics (MVEA)), Missouri Valley Economic Association, vol. 37(1), pages 39-57.
  • Handle: RePEc:mve:journl:v:37:y:2011:i:1:p:39-57

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    References listed on IDEAS

    1. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, July.
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    3. Joshua Greene & Delano Villanueva, 1991. "Private Investment in Developing Countries: An Empirical Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 33-58, March.
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    7. Allen, Stuart D, 1986. "The Federal Reserve and the Electoral Cycle: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 88-94, February.
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    9. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, June.
    10. Banaian, King & Luksetich, William A, 2001. "Central Bank Independence, Economic Freedom, and Inflation Rates," Economic Inquiry, Western Economic Association International, vol. 39(1), pages 149-161, January.
    11. Davis, George & Kanago, Bryce, 1996. "On Measuring the Effect of Inflation Uncertainty on Real GNP Growth," Oxford Economic Papers, Oxford University Press, vol. 48(1), pages 163-175, January.
    12. William D. Nordhaus, 1975. "The Political Business Cycle," Review of Economic Studies, Oxford University Press, vol. 42(2), pages 169-190.
    13. Robert Mundell, 1963. "Inflation and Real Interest," Journal of Political Economy, University of Chicago Press, vol. 71, pages 280-280.
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health


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