voter preferences and state regulation of smoking i introduction tobacco taxation and smoking restrictions are two areas of regulation for which states have maintained a high level of control relative to the federal government 1 given this flexibility states have established a wide range of restrictions on smoking in areas such as government workplaces restaurants bars shopping malls indoor arenas and hospitals 2 although most states restrict smoking in hospitals there is considerable variation among states in restrictions in other areas in the 1998 99 period of this study about two thirds of states restricted smoking in restaurants whereas only four states restricted smoking in bars what has led to variation in smoking restrictions across states in a democratic society one would expect voter preferences to play an instrumental role in determining which policies are enacted and which are not this article provides the first empirical exploration of whether state level smoking restrictions are consistent with preferences of the citizenry taking into account both voting behavior and the role of smoking status in influencing whether an individual votes specifically we examine whether voters preferences for smoking restrictions in restaurants bars malls indoor sporting events and hospitals are consistent with state level restrictions on smoking in each of these public areas 3 our research draws on public choice models of policy making by state and local governments voters preferences typically play a central role because voting affects legislators incentives to support regulations 4 public choice research also finds that nonvoter factors may influence state and local policy making 5 in the case of smoking regulations public health advocates or tobacco industry lobbyists might influence regulatory policies the specific building block of our analysis of state restrictions on smoking is information on individuals voting behavior which we link to their smoking status and preferences over smoking restrictions our analysis uses measures of political pressure that account for individual preferences as well as their voting behavior to examine the possible role of interest group pressures we also control for nonvoter influences on smoking regulation including the proportion of the state population who smoke measures of state ideology and size of the tobacco industry with the exception of smoking in bars there is majority support for smoking restrictions unsurprisingly smokers are less supportive of restrictions than are nonsmokers nonetheless even smokers demonstrate a high level of support for many restrictions smokers are also less likely to vote than are nonsmokers even after controlling for other demographic factors the lower voting rate diminishes voter opposition to antismoking regulation but is usually not critical in view of the substantial support that most smoking restrictions have among smokers the political pressure indices for restrictions on smoking in each public area are generally significantly related to the probability that a state restricts smoking in that public area the nonvoter factors such as the smoking rate in the state and tobacco s role in the state economy are rarely influential policy debates over the desirability of smoking restrictions emphasize possible health risks due to exposure to environmental tobacco smoke ets and effects on business profitability the primary argument for expanding smoking restrictions is to protect workers and customers from exposure to ets 6 as our results show voters are generally supportive of smoking restrictions in public areas which would thereby protect workers as well as themselves and other customers however there is a substantial controversy over the extent of health risks associated with exposure to ets the basis for the push by the u s occupational and safety health administration osha for increased smoking restrictions to protect workers is the highly controversial u

using electoral cycles in police hiring to estimate the effect of police on crime comment previous empirical studies have uncovered little evidence that police reduce crime possibly due to simultaneity problems this paper uses the timing of mayoral and gubernatorial elections as an instrumental variable to identify a causal effect of police on crime increases in the size of police forces are shown to be disproportionately concentrated in mayoral and gubernatorial election years increases in police are shown to substantially reduce violent crime but have a smaller impact on property crime the null hypothesis that the marginal social benefit of reduced crime equals the costs of hiring additional police cannot be rejected

tax incidence when individuals are time inconsistent the case of cigarette excise taxes abstract one of the most cogent criticisms of excise taxes is their regressivity with lower income groups spending a much larger share of their income on goods such as cigarettes than do higher income groups we argue that traditional quantity based measures of incidence are only appropriate under a very restrictive time consistent model of consumption of sin goods a model that is much more consistent with existing evidence on smoking decisions is a time inconsistent formulation where excise taxes on cigarettes serve a self control function that is valued by smokers who would like to quit but cannot this self control function benefits lower income groups more since they have a significantly higher price sensitivity of smoking calibrations show that as a result cigarette taxes are much less regressive than previously assumed and are even progressive for a wide variety of parameter values

no taxation without information deterrence and self enforcement in the value added tax abstract claims that the vat facilitates tax enforcement by generating paper trails on transactions between firms contributed to widespread vat adoption worldwide but there is surprisingly little evidence this paper analyzes the role of third party information for vat enforcement through two randomized experiments among over 400 000 chilean firms announcing additional monitoring has less impact on transactions that are subject to a paper trail indicating the paper trail s preventive deterrence effect this leads to strong enforcement spillovers up the vat chain these findings confirm that when taking evasion into account significant differences emerge between otherwise equivalent forms of taxation jel d83 h25 h26 k34 o17

taxing and regulating vices we study the optimal taxation and regulation of sin goods goods that are enjoyable to consume but also create future negative health consequences within a setting in which individuals are time inconsistent and thus consume too much regulation makes the consumption of sin goods less pleasurable and taxation involves administrative and compliance costs in contrast to previous literature we find that regulation can be beneficial even when corrective taxes are available and individuals are homogeneous moreover despite the inefficiencies associated with the use of both instruments the consumption of the sin good might fall short of the first best the results are robust to consumers heterogeneity

delegated trading and the speed of adjustment in security prices abstract institutional trading arrangements often involve the portfolio manager delegating the task of trade execution to a separate division within the firm we model the agency conflict that arises in this setting and show that optimal performance benchmarks often create an incentive to execute orders contrary to concurrent information flow we hypothesize that aggregate contrarian trading resulting from widespread application of such benchmarks leads to delays in the assimilation of information in security prices using institutional trading data we document the hypothesized contrarian trading pattern and relate the pattern to price adjustment delays in the response of individual stocks to index futures returns the evidence supports the assertion that delegated institutional trading contributes to these delays

lifetime earnings and the vietnam era draft lottery evidence from social security administrative records errata the randomly assigned risk of induction generated by the draft lottery is used to construct estimates of the effect of veteran status on civilian earnings these estimates are not biased by the fact that certain types of men are more likely than others to service in the military social security administrative records indicate that in the early 1980s long after their service in vietnam had ended the earnings of white veterans were approximately 15 percent less than the earnings of comparable nonveterans copyright 1990 by american economic association

a long march perspective on tobacco use in canada in this paper we present a model of tobacco demand in canada with a view to establishing if price and tax policy on the one hand or educational regulatory and demographic influences on the other have been primarily responsible for the substantial drop in consumption since 1980 we address some methodological and econometric issues that have escaped the attention of some analysts to this point using data for the period 1972 2000 we find that non price developments have had a strong deterrent effect and that the price elasticity of demand is now lower than even the recently obtained low estimates propose these findings have strong public policy content jel classification i12 c13 c22 une perspective de longue haleine sur l usage du tabac au canada dans ce memoire on presente un modele de la demande de tabac au canada en vue d etablir laquelle des deux strategies d une part la politique de prix et d imposition de taxes et d autre part les influences de l education de la reglementation ainsi que les changements demographiques a ete davantage responsable de la chute importante dans la consommation du tabac depuis 1980 le texte examine certains problemes methodologiques et econometriques qui ont jusqu ici echappea l attention des analystes a l aide de donnees pour la periode 1972 2000 on montre que les facteurs qui n ont rien a voir avec le prix ont eu un fort effet dissuasif et que l elasticite de la demande par rapport au prix est maintenant plus faible que les faibles elasticites suggerees par certaines etudes recentes ces resultats ont une grande importance pour la politique publique

why understanding smoking bans is important for estimating their effects california s restaurant smoking bans and restaurant sales i introduction a voluminous literature has sought to quantify the effect of smoking bans typically on the quantity of smoking but also on the performance of affected businesses 1 various time periods have been explored types of bans considered locales examined and specifications employed nonetheless the majority of studies share two common failings first smoking bans of a given type e g a restaurant ban are treated as homogenous when in fact such bans have been enacted at various jurisdictional levels municipality county or state at various times in various orders and in various combinations with other types of smoking bans and with similar bans at other jurisdictional levels second empirical specifications do not adequately control for preexisting trends in the dependent variable as a result many studies arrive at fundamentally wrong conclusions we illustrate these points in an investigation of how california s restaurant smoking bans have affected restaurant sales we analyze the effect of smoking bans on restaurant sales for two reasons first the issue plays a role in the policy debate more than 150 studies many published in refereed journals and others in consulting reports undertaken for municipalities have explored whether smoking bans help or hinder restaurants scollo and lal 2005 yet few of these studies properly account for the effects of preexisting trends or changes in trends for the closely related question of ban endogeneity or for ban heterogeneity second restaurant sales data are very rich well measured available by municipality by quarter and over an extended period therefore we can identify effects that would be obscured by cruder data e g periodic survey responses enabling us to draw lessons applicable to studies of the effect of other types of smoking bans e g workplace bans in other dimensions e g smoking prevalence we investigate 267 california municipalities for which the california state board of equalization provides quarterly taxable restaurant sales 2 we begin by employing naive specifications which treat bans as homogenous and control simplistically for trends representative of those typically estimated in the literature the results of our naive specifications indicate that smoking bans have a large negative effect on restaurant revenues however when we examine municipal and state bans separately we find a positive association between municipal bans and restaurant sales and a negative association between the state ban and restaurant sales finally when we control properly for preexisting trends in the dependent variable we find no substantial evidence of any causal relationship running from either municipal bans or the state ban to restaurant sales thus we reach two main conclusions the first is that california s municipal restaurant smoking bans are endogenous in a critical way restaurant sales growth or something correlated with restaurant sales growth appears to cause restaurant bans not vice versa the second is that because communities are heterogenous one must analyze the effect of a ban taking into account the level at which the ban was enacted pooling data and treating smoking bans as homogenous as many studies do is inappropriate cities that impose bans on themselves are likely to differ systematically from those that have bans forced on them by a higher jurisdiction county or state relatedly analyzing and or instrumenting for smoking bans using state level data again as many studies do may fail to capture the relevant variation when the bans have force at a lower level of jurisdiction e g a municipal ban our analysis although focused on restaurant bans and sales has implications for the more extensive literature on how smoking bans influence smoking behavior most importantly it demonstrates the crucial nature of identifying and controlling for trends in the dependent variable whether restaurant revenue as in our data set or smoking rates

cigarette tax revenues and tobacco control in japan the hypotheses of non addiction myopia and rational addiction are tested using annual quarterly and monthly data changes in the prices of japanese cigarettes can be viewed as exogenous from the point of view of consumer behaviour because the japanese government controls cigarette prices the empirical results of this paper support the addiction hypothesis the short run and long run price elasticities range from 0 338 to 0 421 and from 0 679 to 0 686 respectively thus increases in tax revenues in the long run are likely to be smaller than those in the short run as a result tax increases would be an effective means of curbing smoking and reducing its social cost furthermore the debt compensation programmes for the japan railway and the national forestry will not go according to plan unless revenues are increased in the future

taxpayer response to an increased probability of audit evidence from a controlled experiment in minnesota abstract in 1995 a group of 1724 randomly selected minnesota taxpayers was informed by letter that the returns they were about to file would be closely examined compared to a control group that did not receive this letter low and middle income taxpayers in the treatment group on average increased tax payments compared to the previous year which we interpret as indicating the presence of noncompliance the effect was much stronger for those with more opportunity to evade in fact the difference in differences is not statistically significant for those who do not have self employment or farm income and do not pay estimated tax surprisingly however the reported tax liability of the high income treatment group fell sharply relative to the control group

can higher cigarette taxes improve birth outcomes abstract this study examines whether higher state cigarette taxes can be used to improve birth outcomes data on the outcomes of interest are taken from the 1989 1992 natality detail files generating a sample of roughly 10 5 million births the results suggest that smoking participation among pregnant women declines and average birth weights rise when excise taxes are increased these results can be used to form an instrumental variables estimate of the impact of smoking on birth weight this estimate is remarkably close to numbers from a random assignment clinical trial the smoking participation price elasticity is estimated to be 0 5

do workplace smoking bans reduce smoking in recent years workplace smoking policies have become increasingly prevalent and restrictive using data from two large scale national surveys we investigate whether these policies reduce smoking our estimates suggest that workplace bans reduce smoking prevalence by 5 percentage points and daily consumption among smokers by 10 percent although workers with better health habits are more likely to work at firms with smoking bans estimates from systems of equations indicate that these results are not subject to an omitted variables bias the rapid increase in bans can explain all of the recent drop in smoking among workers relative to nonworkers

unwilling or unable to cheat evidence from a tax audit experiment in denmark this paper analyzes a tax enforcement field experiment in denmark in the base year a stratified and representative sample of over 40 000 individual income tax filers was selected for the experiment half of the tax filers were randomly selected to be thoroughly audited while the rest were deliberately not audited the following year threat of audit letters were randomly assigned and sent to tax filers in both groups we present three main empirical findings first using baseline audit data we find that the tax evasion rate is close to zero for income subject to third party reporting but substantial for self reported income since most income is subject to third party reporting the overall evasion rate is modest second using quasi experimental variation created by large kinks in the income tax schedule we find that marginal tax rates have a positive impact on tax evasion for self reported income but that this effect is small in comparison to legal avoidance and behavioral responses third using the randomization of enforcement we find that prior audits and threat of audit letters have significant effects on self reported income but no effect on third party reported income all these empirical results can be explained by extending the standard model of rational tax evasion to allow for the key distinction between self reported and third party reported income

on the path dependence of tax compliance abstract this paper presents experimental evidence that tax compliance is path dependent for given values of the audit probability and the fine for tax evasion we compare the income declaration of subjects who faced a change in one of the two parameters to that of subjects who experienced no such parameter change we show that past tax enforcement regimes continue to have an impact on current income declarations this finding may be explained by reference dependent preferences and it has important policy implications for instance legal transplants cannot be expected to reliably yield similar behavior in countries with different legal histories

effects of supervision on tax compliance evidence from a field experiment in austria we conduct a field experiment on tax compliance focusing on newly founded firms as a novelty the effect of tax authorities supervision on timely tax payments is examined interestingly results show no positive overall effect of close supervision on tax compliance

bad habits and the endogenous timing of urges i present a theory of harmful addiction in which giving in to an unwanted urge i e consumption delays the recurrence of urges in the short run but increases their long run frequency the theory offers new predictions as to how the frequency levels cue dependence and temporal consistency of consumption evolve during habituation while uniquely capturing near term substitution in demand across time new welfare implications for restrictions on consumption and on marketing are also addressed

estimation of limited dependent variable models with dummy endogenous regressors applied economists have long struggled with the question of how to accommodate binary endogenous regressors in models with binary and nonnegative outcomes i argue here that much of the difculty with limited dependent variables comes from a focus on structural parameters such as index coefcients instead of causal effects once the object of estimation is taken to be the causal effect of treatment several simple strategies are available these include conventional two stage least squares multiplicative models for conditional means linear approximation of nonlinear causal models models for distribution effects and quantile regression with an endogenous binary regressor the estimation strategies discussed in the article are illustrated by using multiple births to estimate the effect of childbearing on employment status and hours of work

the mechanisms of policy diffusion local policy adoptions provide an excellent opportunity to test among potential mechanisms of policy diffusion by examining three types of antismoking policy choices by the 675 largest u s cities between 1975 and 2000 we uncover robust patterns of policy diffusion yielding three key findings first we distinguish among and find evidence for four mechanisms of policy diffusion learning from earlier adopters economic competition among proximate cities imitation of larger cities and coercion by state governments second we find a temporal component to these effects with imitation being a more short lived diffusion process than the others third we show that these mechanisms are conditional with larger cities being better able to learn from others less fearful of economic spillovers and less likely to rely on imitation

risk beliefs and smoking behavior i introduction more people die from smoking each year than from any other consumption activity these risks arise from consumer choices in a market context as a result whether consumers are cognizant of the attendant hazards is a central concern in assessing whether there is a market failure and the extent of such a failure influencing people s risk beliefs has been a primary focus of many government interventions in this market including warnings requirements and public information campaigns public opinion poll data provide some insight into general trends in smoking risk beliefs but do little to resolve the more fundamental concern of whether people underestimate the risks posed by cigarettes typical questions ask respondents if cigarette smoking is one of the causes of lung cancer or whether smoking is harmful 1 these general measures of risk awareness provide a useful historical perspective on smoking risk beliefs but do not make it possible to determine whether the public perceives the risk accurately recognizing that smoking is harmful does not imply that the perceived risk level is as great as the actual risk the first exploration of the adequacy of risk beliefs was in viscusi 1990 1992 which examined the adequacy of lung cancer risk beliefs using a quantitative risk question 2 the 1985 national survey used in these studies asked respondents how many smokers out of 100 would get lung cancer because they smoke people generally overestimate the risks of getting lung cancer due to smoking these risk beliefs in turn affect the decision to smoke in the expected manner at least for this risk component which has been the most prominent smoking risk since the 1964 surgeon general report linking smoking and lung cancer the empirical evidence does not indicate a market failure notwithstanding these results a variety of puzzles remain do smokers also perceive the other hazards of cigarettes such as the total mortality risk of smoking if they understand the risk of death do they also properly assess how much life expectancy will be lost due to their premature mortality even if there is such a general understanding on average for the population are there major pockets of ignorance the difference between the smoking and the nonsmoking populations is striking the current u s smoking population is less well educated and has lower income levels than the non smoking population a possible explanation for this difference is that the higher education levels of nonsmokers enable them to obtain a better understanding of the hazards of smoking leading to lower smoking rates among the better educated such differences in risk beliefs have never been analyzed previously due to the absence of smoking risk belief surveys that include such demographic information in this article we exploit the more refined capabilities of two large data sets a 1997 national survey of smoking risk beliefs and a 1998 survey undertaken in massachusetts each of these surveys includes several quantitative risk perception measures as well as much more comprehensive data on background characteristics than in the 1985 survey analyzed in viscusi 1990 1992 in section ii we introduce the survey data and provide an overview of smoking risk beliefs irrespective of the risk measure there is a pronounced tendency to overestimate the risk level compared to objective scientific measures of the risk these results contrast with the frequently expressed claim in the literature that cigarette smokers are the victims of companies advertising 3 according to this alternative view companies have allegedly designed their advertising strategies to exploit potential irrationalities in order to foster higher rates of smoking section iii explores the determinants of these risk beliefs yielding some intriguing results better educated respondents do have more accurate beliefs but because people generally overestimate the risks of smoking the greater accuracy is reflected in a lower assessment of the risks

smoke free air laws cigarette prices and adult cigarette demand i introduction according to the centers for disease control and prevention cdc 2002a cigarette smoking is responsible for more than 430 000 premature deaths each year in the united states as such it represents the single largest cause of preventable deaths in the united states the cdc 2002b estimates that more than 46 million adults in the united states were current smokers in 2000 representing nearly one quarter of the total u s adult population a goal of a major health initiative healthy people 2010 is to reduce smoking prevalence among adults to 12 by 2010 if that goal is to be met a better understanding of the impact public policy plays on adult cigarette demand is needed adult per capita consumption of cigarettes in the united states reached a peak of 4 345 in 1963 and began declining in 1964 the year in which the first surgeon general s report on the health consequences of cigarette smoking was published u s department of health and human services dhhs 1991 at the same time substantial progress was made in reducing the prevalence of adult smoking in the united states according to the national health interview surveys the prevalence of current smoking declined from 42 4 in 1964 to 23 5 in 1999 however the decline in prevalence was much more modest in the 1990s than it was in the previous two and a half decades between 1990 and 1999 the prevalence of cigarette smoking among adults declined by only 2 percentage points much of the progress in curtailing cigarette smoking in the united states can be attributed to the campaign to reduce tobacco use u s dhhs 1991 the public health campaign to reduce tobacco related death and disease in the united states began in the mid 1960s following the release of the first surgeon general s report which causally linked cigarette smoking to lung cancer and a host of other detrimental diseases although consumer education and information dissemination where the mainstay early in the campaign against tobacco the arena shifted to public policy interventions by the 1980s both state and federal governments began increasing cigarette excise taxes and imposing restrictions on smoking in public places and other worksites the implementation of higher excise taxes and stronger smoke free air restrictions continues at all levels of government into the mid 2000s since january 1 2002 37 states and the district of columbia have implemented or passed higher cigarette excise tax rates as of march 18 2005 state excise tax rates on cigarettes ranged from a low of 0 03 per pack in the state of kentucky to 2 46 in rhode island in addition since 1998 when california became the first state to ban smoking in all restaurants and bars numerous other states have followed suit new york massachusetts delaware and rhode island have banned smoking in workplaces restaurants and bars whereas connecticut and maine have banned smoking in all bars and restaurants this article examines the impact of enacting stronger smoke free air restrictions and increasing cigarette prices which will occur as a consequence of cigarette excise tax increases on adult smoking propensity and intensity in the united states unlike previous studies however this article employs a modified two part model of demand in which a generalized linear model glm is employed to yield unbiased elasticity estimates for conditional cigarette demand while controlling for the possibility that smoking sentiment at the state level influences both antismoking policy enactment and changes in smoking behavior as such it provides among the most accurate estimates of the impact of cigarette prices and smoke free air laws on the demand for cigarettes among adults in the united states ii brief review of previous studies numerous econometric studies on the determinants of adult cigarette demand have been published over the past three decades

the unintended consequences of countermarketing strategies how particular antismoking measures may shift consumers to more dangerous cigarettes countermarketing or efforts to reduce consumption of certain products has become common in categories such as tobacco junk food fossil fuels and furs countermarketing has a particularly long history in the tobacco industry efforts to reduce smoking have included excise taxes that increase the cost of consumption smoke free restrictions that make consumption less convenient and antismoking advertising campaigns that highlight the dangers of tobacco use this article presents an analysis of the relative effectiveness of these different strategies we find that cigarette excise taxes are the most effective tool for reducing overall cigarette sales followed by antismoking advertising smoke free restrictions are not found to have a significant effect on cigarette sales we also investigate how these various policy tools induce product substitution this issue is of considerable importance because some countermarketing techniques may potentially shift consumers to more dangerous higher nicotine and

smoking bans maternal smoking and birth outcomes an important externality of smoking is the harm it might cause to those who do not smoke this paper examines the impact on birth outcomes of children of female workers who are aected by smoking bans in the workplace analyzing a 2004 law change in norway that extended smoking restrictions to bars and restaurants we find that children of female workers in restaurants and bars born after the law change saw significantly lower rates of being born below the very low birth weight vlbw threshold and were less likely to be born pre term using detailed data on smoking status during pregnancy we find that relative to the control group most of the benefits arise from changes in smoking behavior of the mother the eect of second hand smoke exposure on birth outcomes in this formulation appears to be quite small however we find suggestive evidence of substituting behavior i e a greater likelihood of smoking at home among fathers since children born to male workers in restaurants and bars after this law change appear to have slightly worse outcomes using individual tax data we find that the law change did not result in changes in earnings or employment opportunities for those aected thus suggesting that the eects seen are likely a direct result of changes in smoke exposure in utero using a twins based analysis we link very low birth weight status to adult labor force participation and suggest that via the improvements in birth weight alone the smoking restriction law in norway could result in a 0 2 percentage point increase in full time employment by age 28

a field experiment on intertemporal enforcement spillovers enforcement can affect compliance directly and indirectly through spillovers we study intertemporal enforcement spillovers by conducting a randomized field experiment in a university exam the initial phase of the experiment is the exam itself we induce variation in enforcement by randomly assigning students to rooms with different monitoring levels the second phase is post exam in this phase all students are subject to the same low level of monitoring our outcome variable is the probability that students steal a pen in the post exam phase we find that enforcement in the exam phase has a strong intertemporal spillover on compliance in the post exam phase students subject to a high monitoring level in the initial phase are about 33 less likely to steal the pen than students subject to low initial monitoring

finishing high school and starting college do catholic schools make a difference in this paper we consider two measures of the relative effectiveness of public and catholic schools finishing high school and starting college these measures are potentially more important indicators of school quality than standardized test scores in light of the economic consequences of obtaining more education single equation estimates suggest that for the typical student attending a catholic high school raises the probability of finishing high school or entering a four year college by thirteen percentage points in bivariate probit models we find almost no evidence that our single equation estimates are subject to selection bias