Working Paper: NBER ID: w10974
Authors: Susan H. Busch; Mireia Jofre-Bonet; Tracy A. Falba; Jody L. Sindelar
Abstract: Smoking is an expensive habit. Smoking households spend, on average, more than $1000 annually on cigarettes. For households in which some members smoke, smoking expenditures crowd-out other purchases, which may affect other household members, as well as the smoker. We empirically analyze how expenditures on tobacco crowd out consumption of other goods, estimating the patterns of substitution between tobacco products and other expenditures. We use the Consumer Expenditure Survey (1995 to 2001), which we complement with regional price data, and state cigarette prices. We estimate a consumer demand system of expenditures on cigarettes, food, alcohol, housing, apparel, transportation, medical care and controls for socio-economic variables and other sources of observable heterogeneity. Descriptive data indicate that, compared to non-smokers, smokers spend less on housing. Results from the demand system indicate that as the price of cigarettes rises, households increase the quantity of food purchased, and, in some samples, reduce the quantity of apparel and housing purchased.
Keywords: No keywords provided
JEL Codes: I1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| price of cigarettes (P22) | food expenditures (D12) |
| price of cigarettes (P22) | housing expenditures (R21) |
| price of cigarettes (P22) | apparel expenditures (L67) |
| tobacco expenditures (H51) | consumption of other goods (E20) |