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Impact of Non-Smoking Ordinances on Hospitality Revenues: The Case of Germany

Author Info

  • Gabriel Ahlfeldt

    ()

    (Chair for Economic Policy, University of Hamburg)

  • Wolfgang Maennig

    ()

    (Chair for Economic Policy, University of Hamburg)

Abstract

Non-smoking ordinances are among the most popular albeit controversial public health-care legislations worldwide. This article provides an empirical assessment of the impact of non-smoking ordinances on bar and restaurant revenues in German Federal States. By application of panel spline regression and difference-in-difference strategies, we find negative impact limited to bars in the very short run. If any, there is a positive impact on total expenditures in the long run, indicating that either consumption pattern has not changed at all or that any reduction in spending by smokers is compensated for by a corresponding increase by non-smokers. These findings support the German – and similar – non-smoking legislations in the sense that positive externalities resulting from reduced health care cost are likely to outweigh the risk to businesses in the hospitality sector, at least in the long run.

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File URL: http://www.hced.uni-hamburg.de/WorkingPapers/HCED-026.pdf
File Function: First version, 2009
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Paper provided by Chair for Economic Policy, University of Hamburg in its series Working Papers with number 026.

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Length: 16 pages
Date of creation: 2009
Date of revision:
Publication status: Published in Hamburg Contemporary Economic Discussions, Issue 26, 2009
Handle: RePEc:hce:wpaper:026
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Web page: https://www.wiso.uni-hamburg.de/fachbereich-vwl/professuren/maennig.html

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Keywords: Keywords: Bar Revenues; Non-smoking Ordinances; Restaurant Revenues;

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Find related papers by JEL classification:
  • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
  • K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law

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  1. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June.
  2. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  3. Benjamin Parker & Eric Chiang, 2007. "Addressing the revenue impact of smoking ordinances," Applied Economics Letters, Taylor & Francis Journals, vol. 14(12), pages 871-875.
  4. Stephen Redding & Daniel M. Sturm, 2005. "The Costs of Remoteness: Evidence from German Division and Reunification," STICERD - Political Economy and Public Policy Paper Series 11, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  5. Alamar, B C & Glantz, Stanton A. Ph.D., 2004. "Smoke-free ordinances increase restaurant profit and value," University of California at San Francisco, Center for Tobacco Control Research and Education qt91w950j4, Center for Tobacco Control Research and Education, UC San Francisco.
  6. Anger, Silke & Kvasnicka, Michael & Siedler, Thomas, 2010. "One Last Puff? – Public Smoking Bans and Smoking Behavior," Ruhr Economic Papers 180, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
  7. David W. Cowling & Philip Bond, 2005. "Smoke-free laws and bar revenues in California - the last call," Health Economics, John Wiley & Sons, Ltd., vol. 14(12), pages 1273-1281.
  8. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  9. J. Dunham & ML. Marlow, 2000. "Smoking laws and their differential effects on restaurants, bars, and taverns," Contemporary Economic Policy, Western Economic Association International, vol. 18(3), pages 326-333, 07.
  10. Gabriel Ahlfeldt & Wolfgang Maennig, 2009. "Impact of Non-Smoking Ordinances on Hospitality Revenues: The Case of Germany," Working Papers 026, Chair for Economic Policy, University of Hamburg.
  11. Michael R. Pakko, 2006. "On the economic analysis of smoking bans," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Oct, pages 115-130.
  12. Adams Scott & Cotti Chad D., 2007. "The Effect of Smoking Bans on Bars and Restaurants: An Analysis of Changes in Employment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-34, February.
  13. Robert K. Fleck & F. Andrew Hanssen, 2008. "Why Understanding Smoking Bans Is Important For Estimating Their Effects: California'S Restaurant Smoking Bans And Restaurant Sales," Economic Inquiry, Western Economic Association International, vol. 46(1), pages 60-76, 01.
  14. Michael R. Pakko, 2008. "The economic impact of a smoking ban in Columbia, Missouri: an analysis of sales tax data for the first year," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Oct, pages 30-40.
  15. Benjamin C. Alamar & Stanton A. Glantz, 2004. "Smoke-free Ordinances Increase Restaurant Profit and Value," Contemporary Economic Policy, Western Economic Association International, vol. 22(4), pages 520-525, October.
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Cited by:

  1. Verardi, Vincenzo & Wagner, Joachim, 2010. "Robust Estimation of Linear Fixed Effects Panel Data Models with an Application to the Exporter Productivity Premium," IZA Discussion Papers 4928, Institute for the Study of Labor (IZA).
  2. Michael Kvasnicka & Harald Tauchmann, 2010. "Much Ado About Nothing? – Smoking Bans and Germany’s Hospitality Industry," Ruhr Economic Papers 0172, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Michael Kvasnicka & Harald Tauchmann, 2011. "Much Ado About Nothing? Smoking Bans and Germany's Hospitality Industry," Post-Print hal-00719873, HAL.
  4. Gabriel Ahlfeldt & Wolfgang Maennig, 2009. "Impact of Non-Smoking Ordinances on Hospitality Revenues: The Case of Germany," Working Papers 026, Chair for Economic Policy, University of Hamburg.
  5. Tauchmann, Harald & Lenz, Silja & Requate, Till & Schmidt, Christoph M., 2013. "Tobacco and alcohol: complements or substitutes?," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 539-566.
  6. repec:zbw:rwirep:0172 is not listed on IDEAS
  7. Justina A.V. Fischer & Alfonso Sousa-Poza, 2010. "The Impact of Institutions on Firms’ Rejuvenation Policies: Early Retirement with Severance Pay versus Simple Lay-Off. A Cross-European Analysis," Working Papers 034, Chair for Economic Policy, University of Hamburg.
  8. Jaume Garcia Villar & Ángel López-Nicolás, 2014. "Who is afraid of the big bad ban? An evaluation of the effects of the Spanish clean air law on expenditure at hospitality venues," Economics Working Papers 1413, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2014.

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