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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. 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.
    2. Paul Heidhues & Botond Koszegi & Philipp Strack, 2023. "Misinterpreting Yourself," Cowles Foundation Discussion Papers 2378, Cowles Foundation for Research in Economics, Yale University.

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