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. …