Three Essays in Empirical Economics

This thesis consists of three essays in empirical economics. The first essay investigates how the smoking behavior of an individual changes when faced with a change in income and taxes on cigarettes in a price-tiered cigarette market structure. To explain the behavior of smokers a simple two-period model is developed. The model makes certain predictions which have been tested with a unique panel dataset from the International Tobacco Control (ITC) surveys. Findings from the regression models illustrate that a change in price is negatively correlated with cigarette consumption, whereas a change in income is positively correlated with the same variable. It is further observed from the regression results that higher income increases the probability to uptrade and reduces the probability to quit smoking. Besides, higher cigarette taxation raises the probability to down-trade and reduces the probability to up-trade. Interestingly higher taxes do not raise the probability to quit smoking. The findings of the paper hold strong policy relevance. It reveals the need for overall cigarette taxes to be raised to an extent so that it off-sets any positive effects of income growth. In addition, tier-taxes should be designed with caution so that higher taxes do not encourage smokers to down-trade but rather pushes them to quit smoking altogether. The second essay studies how a change in the Perception of Tobacco Risk (PTR) affects the attitude of smokers and non-smokers towards smoking. Using the same panel data-set as the first essay, a Perception of Tobacco Risk Index (PTRI) is developed for all smokers and non-smokers. Results show that among all different types of smokers, quitters have the highest PTRI whereas bidi (cheap local alternative to cigarettes) smokers have the lowest. Among the different sociodemographic groups the higher income, more educated, and those living in urban areas display a higher PTRI than their respective counterparts. However, when looking at a change in PTRI, it is observed that the change is bigger among the lower income, less educated and those living in rural areas. Analysis of panel data reveals that the change in PTRI is positively correlated with the probability to quit smoking for most socio-demographic groups. However, increase in PTRI does not significantly affect initiation of smoking and reduces cigarette consumption per day only for the more educated group. Such results hold strong policy implications. First, they show that changing PTR holds promising implications for controlling tobacco consumption concerning raising quitting probability. Second, they bring into light, specific socio-demographic groups where policies to change PTR should be targeted. The final essay is a joint paper. In this essay, we explore the concepts of provincial gross, net and share of net mobility rates across education and age groups using the Survey of Labor and Income Dynamics (SLID, 1993-2011) of Canada. Our results show that provincial mobility of young and more educated are more than their counterparts. The share of net mobility rates reveals that young and less educated individuals mostly have one-way inter-provincial mobility. Moreover, inter-provincial migration using gravity model shows that the effects of border and population sizes of destination and original provinces have positive influences and distances have the negative influence on provincial migration. We also identify a positive correlation between provincial in- and out-migration in Canada. This shows that provinces that lose more people also seem to attract more people. Our analysis further illustrates that net provincial mobility has a stronger relationship with in-migration compared to out- migration.