Working Paper: NBER ID: w20097
Authors: Donald S. Kenkel; Maximilian D. Schmeiser; Carly J. Urban
Abstract: In this paper we estimate the causal income elasticity of smoking participation, cessation, and cigarette demand conditional upon participation. Using an instrumental variables (IV) estimation strategy we find that smoking appears to be a normal good among low-income adults: higher instrumented income is associated with an increase in the number of cigarettes consumed and a decrease in smoking cessation. The magnitude and direction of the changes in the income coefficients from our OLS to IV estimates are consistent with the hypothesis that correlational estimates between income and smoking related outcomes are biased by unobservable characteristics that differentiate higher income smokers from lower income smokers.
Keywords: Smoking; Income Elasticity; Earned Income Tax Credit; Public Health; Causal Inference
JEL Codes: H21; I11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Changes in the Earned Income Tax Credit (EITC) (H31) | Income (D31) |
| Income (D31) | Smoking Participation (I12) |
| Income (D31) | Number of Cigarettes Smoked Daily (Y10) |
| Income (D31) | Smoking Cessation (I12) |