Discussion Papers In Economics
And Business

Consumption of Cigarettes, Nicotine, and Tarunder Anti-smoking Policies: Japan as a Case Study

Junmin Wan
Discussion Paper 04-12-Rev.

Graduate School of Economics andOsaka School of International Public Policy (OSIPP)
Osaka University, Toyonaka, Osaka 560-0043, JAPANConsumption of Cigarettes, Nicotine, and Tarunder Anti-smoking Policies: Japan as a Case Study

Junmin Wan
Discussion Paper 04-12-Rev.

March 2006
この研究は「大学院経済学研究科・経済学部記念事業」
基金より援助を受けた、記して感謝する。
Graduate School of Economics andOsaka School of International Public Policy (OSIPP)
Osaka University, Toyonaka, Osaka 560-0043, JAPANConsumption of Cigarettes, Nicotine, and Tarunder Anti-smoking Policies: Japan as a Case Study∗
Junmin Wan †Osaka University, Japan∗An earlier version of this paper was presented at the 2002 Spring Meeting of theJapanese Economic Association at Otaru University of Commerce, 12 June 2002, as arevised version of chapter 4 of the author s doctoral dissertation (Osaka University, 2004).
The current version was completed on 20 February 2006.
†
I would like to thank Kazuo Ogawa, Fumio Ohtake, Yoshiyasu Ono, Jie Qin, and
Wataru Suzuki for their valuable comments. I also thank Seki Asano, Shinsuke Ikeda,
Daiji Kawaguchi, Dariusz Stanko, Midori Wakabayashi, Yan Xu, and seminar participants at Osaka University and at the 2002 Spring Meeting of the Japanese Economic
Association for their helpful advice. I give special thanks to Frank J. Chaloupka, Charles
Yuji Horioka, David Merriman, and Hana Ross for their constructive and beneﬁcial suggestions. Any remaining errors are my responsibility. Correspondence: Junmin Wan, OSIPP,
Machikaneyama 1-31, Toyonaka, Osaka 560-0043, Japan; tel/fax: +(81)(6)68505839; email: wan@osipp.osaka-u.ac.jp

Abstract
Japan has implemented a number of anti-smoking policies; these include information disclosures, taxation, and smoking bans. These measures have increased the information available to consumers, as well as
tax rates on tobacco products. First, this paper shows, theoretically,
the association between a lack of information and over-consumptionof cigarettes, and then examines the eﬀects of smoking policies using
monthly data from 1951 to 1999. Long-term policies have had greater
eﬀects than short-term policies. Taxation has reduced consumption,
but income diﬀerences have had no signiﬁcant eﬀect. Following healthdisclosures in 1964 and 1967, many consumers switched to ﬁlteredcigarettes and low-nicotine and low-tar products, respectively. The
move to lower tar and nicotine products was further accelerated by theharmful to health label applied to cigarettes in 1972, although manysmokers then raised the number of cigarettes they smoked to keep up
their intake of nicotine. Other policies have decreased cigarette, nicotine, and tar consumption since 1972.

JEL classif ication: I18; D11; D12
Keywords: anti-smoking, health information, nicotine-tar, compensative
behavior, rational addiction

1

Introduction

1.1

Purpose and findings

Smoking is a complicated behavior. Price, income, and past and future
cigarette consumption inﬂuence smoking behaviors, as do factors such as
health information and regulations related to this unhealthy and addictive
behavior. It is thus important to understand how cigarette consumers respond to health information and regulations. Here, I incorporate healthinformation into a rational addiction (RA) model. The model indicates that
consumers over-consume cigarettes due to a lack of information on related
health hazards, and that more and new information reduces consumption.
Because smoking is addictive and detrimental to health, to protect humanhealth and reduce the social costs of smoking, the Japanese government
has implemented anti-smoking policies that include health information disclosures, taxation, and smoking bans. This paper examines the eﬀects ofthese policies on cigarette consumption, and on nicotine and tar intake,within a framework of rational addiction and non-addiction using generalized methods of moments (GMM), ordinary least-squares (OLS) techniques,
and monthly data from Japan from 1951 to 1999.
The analyses showed that anti-smoking policies have had a signiﬁcant
impact on consumer behavior. Long-term policies have had as much as twice
the impact of short-term policies, and long-term policies, such as health hazard information campaigns and tax increases, have become more developed
over time. Consumers have responded by changing their cigarette type or by
reducing or quitting smoking. The share of ﬁltered cigarette sales has been
increasing since the 1960s, following the ﬁrst oﬃcial information disclosure
on cigarette risks in Japan. Consumers have also switched to low-nicotine

1and low-tar cigarettes, following the release of data on nicotine and tar consumption in 1967. The printing ofsmoking is harmful to healthon everycigarette package since 1972 has further increased the move to lower tar andnicotine products, although consumers have compensatively raised their total consumption of low-nicotine/tar brands to maintain a consistent intake
of nicotine, owing to the addictiveness of cigarettes. However, other control
policies implemented since 1972, such as workplace smoking bans, smoking
science research, health warnings, nicotine labeling, and oﬃcial reports on
smoking, have helped reduce the consumption of cigarettes, nicotine, andtar overall.

1.2

Japanese smoking issues and international regulations

Smoking is a serious social and economic problem in Japan, with lung cancer
ranking as the most dangerous cancer in the country since 1996. In 2000, theadjusted mortality rate in Japan from lung cancer was as much as 2.5 times
greater than the average rates in the U.S., Germany, Italy, France, Sweden,
and the Netherlands.1 The smoking rate in Japan is very high comparedto rates in other developed countries.2 Scientiﬁc research has shown thatsmoking causes many kinds of cancer, especially lung cancer. Even without
accounting for the loss of human life caused by smoking, the social costs ofsmoking are immense.3
To reduce and prevent smoking worldwide, the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC) was unan1

The number of deaths caused by lung cancer was reported as 39,053 males and 14,671
females in 2000. See Ikeda and Kamimura (1998) and Ikeda et al. (2004) for details.
2
According to a survey by Japan Tobacco Inc., 45.8% of adult males and 13.8% adultfemales smoked in 2005.
3
Social cost = medical costs, etc. - (tax revenue + beneﬁt of tobacco industry, etc.).
Japan s national health insurance system may actually be one cause of the high smoking
rate because smokers do not have to pay additional insurance premiums under the system.
See Wan (forthcoming) for details.

2imously approved by all WHO members (192 countries) on 27 May 2003.
Japan also ratiﬁed this treaty and instituted its principles on 27 February 2005. The treaty focuses on information dissemination concerning thehealth eﬀects of smoking, taxation on tobacco products, and smoking bans.
Japan has instituted numerous policies similar to those recommended by
the FCTC. Japan s anti-smoking policies will be detailed in Section 2.2.

1.3

Related literature and departure from previous studies

Many previous papers have analyzed the consumption of hazardous goods
such as cigarettes. Ippolito (1981) developed a theoretical model to analyze
consumer reactions to new health information. Ippolito and Ippolito (1984)
provided empirical evidence to show that new health information reduces
cigarette consumption. Goldbaum (2000) showed that an endogenous desire
to quit smoking can result from a rational consumption path chosen as theconsumer begins smoking. Viscusi (1992) and Hu et al. (1995) also reported
that health hazard information has a strong eﬀect on consumer behavior.
Clark and Etile (2002), based on British data, found that smokers whodevelop health problems from smoking are likely to smoke less or quit in the
future. The eﬀects of anti-smoking policies such as workplace smoking bans
were analyzed by Evans et al. (1999) and Bardsley and Olekalns (1999),
whose results indicate that such bans reduce smoking. Here, a testable RA
model incorporating health information and regulations was constructed andtested using Japanese policy events and monthly data on cigarette, nicotine,
and tar consumption.
Although several studies have examined Japanese cigarette consumption,
their focus and methods diﬀered from those of this paper. For example,
Haden (1990) was not concerned with addiction and health hazard infor-3

mation. Without considering the addictive aspect, Yorozu and Zhou (2002)
found that information reduces smoking, using cross-sectional, prefecturelevel data; however, the information measure in this instance was prefecturalanti-smoking budget dummy data collected by telephone conversations withprefectural oﬃcials.4 Using panel data on inter-brand cigarettes, Wan (June
2004) found that the mandatory information disclosure of nicotine and tar
content has decreased the demand for high-tar (nicotine) brands, but that
consumers have compensatively increased total consumption to keep their
nicotine intake steady.

1.4

Structure of the paper

The remainder of this paper is organized as follows. Section 2 examines
knowledge and beliefs in relation to smoking and the main anti-smoking
policies in Japan. Section 3 describes the conceptual and empirical speciﬁcations, while section 4 presents the data and empirical strategy, and section
5 reports the estimation results. The conclusion and policy implications are
discussed in section 6.

4
Two other issues must also be addressed. First, Yorozu and Zhou (2002, p. 79) listed
per capita consumption as 414.32 packs (20 cigarettes per pack) per year, but the Public
Finance Statistics publication edited by the Ministry of Finance of Japan, and Wan(forthcoming), show per capita consumption in 1990 and 1995 as 130.03 (20 cigarettes
per pack) and 133.25 packs, respectively; therefore, the consumption data may have been
overestimated by as much as three times by the former study. Second, the eﬀect of theanti-smoking budget may have arisen from the discretionary estimation method (pooled
OLS of a 2-year panel) and prefectural ﬁxed eﬀects. Additionally, an anti-smoking budget
may be used not only for information dissemination but also for other purposes, such as
the construction of smoking areas (because of smoking bans in other areas).

42Knowledge, Beliefs, and Anti-smoking Policies

2.1

Knowledge and beliefs in relation to smoking in Japan

A number of surveys have examined smoking and health in Japan.5 Twosurveys have collected information on the harmful eﬀects of smoking.6 Table
1a lists the percentages of respondents who knew about the negative healthimpacts of smoking. In this table, the values in thediﬀerencecolumnindicate the increase in the proportion reporting to know about the damage
from smoking.7 All the values were positive and signiﬁcant, indicating that
information on smoking damage has increased over time.
Smokers

reasons for reducing or quitting smoking are shown in Table

1b.8 The most important reason given for every year is that smoking isharmful to health.

The change in the importance of health reasons from1981 to 1988 was larger than that from 1988 to 1999. This implies that there
was a sharp increase in the amount of information regarding smoking hazards
from 1981 to 1988. The second most important reason changed over time.
Cost was relatively unimportant and increased little in importance from1981 to 1988 due to the relatively low real price of cigarettes and the bubble
economy. In contrast, the eﬀect of cost increased sharply in importance from1988 to 1999 due to the relatively high real price of cigarettes that resulted
from a tax increase and Japan s depressed economy.

5

See Appendix for details.
The questions used almost the same wording to describe the health damage fromsmoking, even though these two surveys were conducted by two diﬀerent institutions, andat diﬀerent times.
7
The samples of the surveys were assumed to have binomial distributions. Diﬀerence
tests were used to test whether there were diﬀerences in information between earlier andlater surveys, and among smokers, former smokers, and non-smokers.
8
Former smokers reasons for quitting or reducing smoking are not shown here. The
reasons are very similar to those of smokers who want to quit.
6

5

2.2

Anti-smoking policies in Japan

Governmental policies are considered a main contributor to the changes in
consumer attitudes described in section 2.1. Following the
Smoking and HealthReport on

by the Ministry of Health, Labor, and Welfare ofJapan (MHLWJ), the government has implemented a number of tobaccocontrol policies. There were ten main tobacco-control policies instituted
between 1951 and 1999, as well as six rises in cigarette tax hikes. These
policies can be roughly divided into three parts: information disclosure,cigarette taxes, and smoking bans.
The MHLWJ ﬁrst issued information on the detrimental health eﬀects
of smoking on 6 February 1964 in a report entitled
Damage from Smoking.

A Notice about Health

The report was given to prefectural governors andto the mayors of several designated cities, and followed the release of the U.S.
Smoking and Health Report, published in 1964. In April 1967, information
on nicotine and tar content was released in newspapers, as mandated by
the Ministry of Finance. Beginning August 1972, cigarette manufacturers
were required to include the following warning on all cigarette packages,
Let s be careful about smoking too much for health reasons.

In October

Report on Smoking and Health,edited by

1987, the ﬁrst edition of thethe MHLWJ, was released. In January 1990, cigarette manufactures wererequired to include the following warning on cigarette packages,

Let s becareful about smoking too much because there is a possibility that it willruin your health, and to print the nicotine and tar contents on the package.
The MHLWJ released the second edition of the
HealthReport on Smoking andin May 1993. In the analysis, dummies were used to examine theeﬀects of information dissemination.
Taxes on tobacco products increased six times from 1951 to 1999, as
6

summarized by Wan (2001). The ﬁrst proposed cigarette tax increase waspassed in the House of Representatives on 12 April 1968 and enforced on 1
May 1968. The second, and additional increases up to the sixth, were passed
on 25 October 1975, 7 February 1980, 1 February 1983, 8 May 1986, and6 October 1998, respectively, and enforced on 18 December 1975, 22 April
1980, 1 May 1983, 1 May 1986, and 1 December 1998, respectively. Thus,
consumers can expect future tax and price variations.9
Other policies also aimed to control tobacco use. In April 1978, the
MHLWJ issued an edict requiring national hospitals and sanitariums under
its jurisdiction to restrict smoking to certain areas. In June 1978, domestic
airlines instituted non-smoking areas, while in July 1978, ferries connectedwith Japan Railway instituted non-smoking sections. The Japanese government also established the Smoking Research Foundation in April 1986 toscientiﬁcally examine the health eﬀects of smoking.

3

Conceptual and Empirical Specifications

A model was required to identify the eﬀects of the anti-smoking policies
described in Section 2.2. The anti-smoking policies have mainly focused onhealth information, taxation, and workplace smoking bans. The workplacesmoking ban, to some extent, constitutes an extension of the information
dissemination policies because smoking bans aim to protect human healthand to reduce consumption, both directly and indirectly, by serving as reminders of the danger of smoking. Thus, in this study, health information
was incorporated into the framework adopted from Becker et al. (1994).
As Stigler and Becker (1977) have noted,

A consumer may indirectly

receive utility from a market good, yet the utility depends not only the9Source: the Asahi Shimbun, a main newspaper in Japan, 1951-1999.

7

quantity of the good, but also the consumer s knowledge of its true or
alleged properties. If he does not know whether the berries are poisonous,
they are not food, if he does not know that they contain vitamin C, they
are not consumed to prevent scurvy.

The consumer derives utility froma good based on his or her limited knowledge about it. This knowledge
is produced by scientiﬁc research and is thus exogenous to the consumer.
Cigarette demand as a function of health hazard information was therefore
derived, as follows.
Consumers were assumed to have inﬁnite lives and to maximize lifetime
utility discounted at the rate r. Utility was composed of two parts: euphoria
from smoking and disutility from knowing the health hazards of smoking.
Consumption euphoria and the disutility of the health hazard were assumed
to be separable.10 The consumer s utility is bounded by his or her limited
information.
V (Ct , Ct−1 , Yt , et ; It ) = U (Ct , Ct−1 , Yt , et ) − α(It )Ct .

(1)

10
For simplicity, I assumed that the disutility of the health hazard is separablefrom the consumption utility. I examined the case for which the disutility from thehealth hazard was non-separable from the consumption utility as V (Ct , Ct−1 , Yt , et ; It ) =[γ(It )Ct ]U(Ct , Ct−1 , Yt , et ). The calculation was complicated, but in the simplest case,
V (Ct , Ct−1 , Yt , et ; It ) = γ(It )U (Ct , Ct−1 , Yt , et ); the demand equation was almost thesame as equation (3), where η(It ) = 0 and the coeﬃcient of Ct+1 was not βθ but[γ(It+1 )/γ(It )]βθ. If negative information shock (or bad news) means that γ(It+1 )/γ(It )becomes smaller, this (negative) information shock may increase consumption because theconsumer becomes less forward looking, and increases current consumption, increasing theabsolute values of short- and long-run price elasticities. The amount of information on
the health hazards of smoking has increased with time; thus, γ(It+1 )/γ(It ) may have decreased with time. This decreasing γ(It+1 )/γ(It ) may explain why estimates of β havebeen too small in the literature, e.g., in Becker et al. (1994), and in this paper. The
detailed proof is available upon request.

8

The consumer s problem is

max

∞




β t−1 U (Ct , Ct−1 , Yt , et ) − α(It )Ct .

t=1

s.t.

∞


(2)

β t−1 (Yt + Pt Ct ) = A0

t=1

β = 1/(1 + r)

Here Ct , Ct−1 are the quantities of cigarettes consumed in periods t and t-1,
respectively. Yt is the consumption of the composite commodity in period t,
and et reﬂects the impact of unmeasured life-cycle variables on utility. The
composite commodity, Y , is the numeraire, and thus the price of cigarettes
in period t is denoted by Pt . The rate of interest was assumed to equal
the rate of time preference. β is the time discount factor. Any eﬀect of
C on earnings and on the present value of wealth (A0 ) were ignored. The
same applies to the eﬀect of C on other types of uncertainty. The initialcondition for the consumer in period 1, C 0 , measures the level of cigarette
consumption in the period prior to the one under consideration.
α(It ) is the consumer s disutility factor, which is the consumer s subjective belief that smoking is truly harmful to his or her health. This subjective
belief was assumed to increase with information It by a Bayesian learningt)
framework; thus, dα(IdIt > 0. New beliefs will be formed when new healthhazard information is announced.
The associated ﬁrst-order conditions are

Uy (Ct , Ct−1 , Yt , et ) = λ,U1 (Ct , Ct−1 , Yt , et ) + βU2 (Ct+1 , Ct , Yt+1 , et+1 ) − α(It ) = λPt .

A consumption euphoria function that is quadratic in Yt , Ct , and et was9considered. By solving the ﬁrst-order condition for Yt and substituting it into
the ﬁrst-order condition for Ct , a linear diﬀerence equation can be derived:

Ct = θ0 + θCt−1 + βθCt+1 + θ1 Pt + η(It ) + θ2 et + θ3 et+1

(3)where,11η(It ) =uyy α(It ).
2(u11 uyy − u1y ) + β(u22 uyy − u22y )(4)

Health hazard information cannot be anticipated by the consumer. If theconsumer obtains new health hazard information at time t, the short-run
eﬀect of health hazard information is1dη(It )
dCt
=
< 0,
dI ∗
θ(1 − φ1 )φ2 dIt(5)

which is deﬁned as the impact of an increase in current and all future information on current consumption, with past consumption being held constant.
If there is no information depreciation, the long-run eﬀect of health hazard
information is1dη(It )
dC∞
=
< 0,
dI
θ(1 − φ1 )(φ2 − 1) dIt(6)

which is deﬁned as the eﬀect of a permanent increase in information, in all
11This model setting and equation (3) have also been presented by Wan (2001, Dec.
2004). There appears to be a misprint in the publication by Becker et al. (1994). According to my calculations, the last multiplicative term in the numerator of the formula for θ3should be u2y uey instead of u2y u2e .
−(u u −u1y u2y )uyy λ, θ1 = (u u −u2 )+β(u,θ0 = −λ(uy1 + βuy2 ), θ = (u u −u122 yy)+β(u u −u2 )u −u2 )11 yy

θ2 = (u

22 yy

1y

2y

11 yy

1y

22 yy

2y

−(uyy u1e −u1y uey )−β(u u2e −u2y uey ), θ3 = (u u −uyy
. A good is considered ad222 )+β(u u2
11 uyy −u1y )+β(u22 uyy −u2y )11 yy
22 yy −u2y )1ydictive if θ > 0; the degree of addiction increases with θ. The roots of the diﬀer2
2
β)1/2
β)1/2
, φ2 = 1+(1−4θ, and the stability condience equation are φ1 = 1−(1−4θ2θ2θ
2tions are 4θ β < 1, φ1 < 1, φ2 > 1. The short- and long-run price eﬀects are
θ1
dCt
∞
1
= θ(1−φ, dC= θ(1−φ1θ)(φ. See Becker et al. (1994) for details.
dP ∗
dP
1 )φ2
2 −1)

10

dCt
∞
periods. | dC
dI | > | dI ∗ |, meaning that the absolute value of the long-run

eﬀect is larger than that of the short-run eﬀect.

4

Dataset and Estimation Strategy

4.1

Dataset and variable creation

The data were comprised of monthly time series data from Jan. 1951 toOct. 1999. Table 2a presents the means, standard deviations, and otherdescriptive statistics for the variables, following seasonal adjustments.
Cigarette purchases by Japanese worker households (Ct ) refers
to cigarette purchases in packs (20 cigarettes per pack) per capita, permonth, per family, divided by the number of family members.12 Purchasedata were obtained from thependiture Survey (FIES).

Annual Report of Family Income and Ex-

13 Hoarding and stock dummies were taken into

account. The data were seasonally adjusted using X-12 ARIMA, a seasonal
adjustment program.
Nicotine intaket is the monthly intake of nicotine in minigrams per
capita. The data were created by multiplying cigarette purchases by nicotine
content per cigarette. The data were then seasonally adjusted using X-12
ARIMA.
Tar intaket is the monthly intake of tar in minigrams per capita. The
data were made by multiplying cigarette purchases by the tar content percigarette and seasonally adjusted using X-12 ARIMA.
Price (Pt ) is the real average retail cigarette price per pack for each12

In the FIES, the respondents were divided into two groups: worker and non-worker
households. A non-worker household has no labor income. In this study, only information
on worker households was used because a labor income variable was available for thisgroup.
13
The trend of per capita cigarette purchase is similar to the statistical data shown in
Wan (forthcoming), though the mean here is smaller than the statistical one.

11

month and is equal to the Tobacco Price Index divided by the Consumer
Price Index (CPI).14 The data were acquired from thethe Consumer Price Index
Survey.

and theAnnual Report on

Monthly Report on the Retail Price

These data were also seasonally adjusted using X-12 ARIMA.

Disposable income (Yt ) is real per capita disposable income per monthfor salaried worker households. These data were from theof Family Income and Expenditure Survey

Annual Reportand calculated by dividing the

average household disposable income by the average number of household
members per household and the CPI. The data were seasonally adjusted
using X-12 ARIMA.
Tax Rate (T axt ) is the rate of tax increase based on data from the
Public Finance Statistics.
US Report is a dummy variable for the release of Smoking and Health:
Report of the Advisory Committee to the Surgeon General of the Public
Health Service

in 1964 in the U.S. The Japanese government ﬁrst oﬃciallydisseminated A Notice about Health Damage from Smoking to prefectural
governors and the mayors of several cities following the U.S. Report. Thisvariable had a value of 0 from Jan. 1951 to Dec. 1963, and 1 from Jan.
1964 to Oct. 1999.
Nicotine-tar release is a dummy variable relating to the release of
nicotine and tar information in main newspapers in Japan. The variable
had a value of 0 from Jan. 1951 to Mar. 1967, and 1 from Apr. 1967 toOct. 1999.
Warning1 is a dummy variable relating to the warning
careful about smoking too much for health reasons

Let s beprinted on cigarette14
As shown in Merriman (2002), cigarette smuggling may exist if the domestic price is
diﬀerent from the foreign one, but the smuggling seems not a big issue in Japan. It may
be because of geography (island nation).

12

packages. The variable had a value of 0 from Jan. 1951 to Jul. 1971, and 1
from Aug. 1971 to Oct. 1999.
Dummy7504 is a dummy variable for the period from Apr. 1975 toJuly 1975, with a value of 1 from Apr. 1975 to July 1975, and 0 in all otherperiods. The tax increase proposal was passed by the Finance Committee
on 24 Apr. 1975, but it was voted down by the Lower House on 4 Jul. 1975.
Dummy7509 is a dummy variable for the period Sept. 1975 to Nov.
1975, with a value of 1 from Sept. 1975 to Nov. 1975, and 0 in all otherperiods. The tax increase proposal was submitted to the Diet again on 20
Sept. 1975 and was enforced on 18 Dec. 1975.
Workplace ban is a dummy variable for smoking bans. It had a valueof 0 from Jan. 1951 to Mar. 1978, and 1 from Apr. 1978 when the smoking
ban in facilities such as hospitals was mandated to Oct. 1999.
Research is a dummy variable for smoking research.15 It had a valueof 0 from Jan. 1951 to Mar. 1986, and a value of 1 from Apr. 1986, when
the Smoking Research Foundation was established, until Oct. 1999.
Report1 is a dummy variable for the 1st edition of the
Smoking and Health.

Report on

This variable had a value of 0 from Jan. 1951 to

Sept. 1987, and a value of 1 from Oct. 1987, when the report was released,
until Oct. 1999.
Warning2 is a dummy variable relating to the warning

Let s becareful about smoking too much because there is a possibility it will ruin
your health.

This variable had a value of 0 from Jan. 1951 to Dec. 1989,

and a value of 1 from Jan. 1990, when the warning was mandated, until
15

After this event (April 1986 founding of the Smoking Research Foundation), many
scientiﬁc articles on smoking damage have been reported from this foundation in every
year since that time. The funding volume is huge, and the number of articles is averagely
about 140 every year during 1986-2001. The research pursuers are averagely about 450
persons every year. The yearly funding is about 330 million yen. The detail is in the
Appendix A (A2) of Wan (2001).

13

Oct. 1999.
Report2 is a dummy variable for the 2nd edition of Report on Smoking
and Health.

It had a value of 0 from Jan. 1951 to May 1993, and a valueof 1 from Jun. 1993, when the report was released, until Oct. 1999.
Hoarding is a dummy variable for the months just before cigarette tax
increases. According to Wan (2005), the lead of T axt is a valid proxy for
Hoarding.
Stock is a dummy variable for the months immediately after cigarette
tax increases. According to Wan (2005), T axt is a valid proxy for Stock.

4.2

Unit root tests

If any of these variables were not stationary, some problems of statisticalinference would arise if GMM or OLS were used. Therefore, each variable
was tested for stationarity using the augmented Dickey-Fuller (ADF) test
and Phllips-Perron test (1988) (see Table 2b).
The null hypothesis that Ct , N icotine intaket , T ar intaket , Pt , ∆Yt
and T axt have unit roots was rejected at the 1% signiﬁcance level; thesevariables were thus considered to be stationary. Because the null hypothesisthat Yt had a unit root could not be rejected at any conventional signiﬁcancelevel, Yt was not considered stationary. Including Yt while using GMM and
OLS could have created a bias. Therefore, ∆Yt was used in the estimation.

4.3

Estimation technique

GMM and OLS methods were used to obtain parameter estimates. For
the addiction model, OLS estimates may not be consistent because of theendogeneity of past and future consumption and because of the possibility
that the use of leads and lags gave rise to serial correlation in the residuals.

14

To obtain consistent estimates, GMM was used.16 OLS was used for the
non-addiction model.
The GMM estimates will be consistent if suitable instrument variables
are used. As discussed in Wan (forthcoming), the cigarette price and tax
is exogenous in Japan from the viewpoint of consumers because the government controls the price and new law is needed for a tax increase. The nominal cigarette price cannot be changed, except for a change in the cigarettetax. Six cigarette tax increases were passed by the Japanese government
from 1951 to 1999, not because of ﬂuctuations in cigarette demands, butmainly because of a large deﬁcit in public funds.17 The consumer can perfectly anticipate the tax increase because there are several months (three to
six months) between the enactment and implementation of a new cigarette
tax law. Furthermore, because prices are strongly correlated with consumption, they are thought to be good instrument variables for consumption. The
lagged cigarette price was used as an instrument variable for past cigarette
consumption, while the lead of price was used as an instrument variable for
future cigarette consumption. The leads and lags of the rate of the tobacco
tax increase were also included as additional instruments.18
Hansen s (1982) J test for over-identifying restrictions implied by the
instruments was used as a speciﬁcation test of the model. To obtain consistent estimates, the hoarding and stock proxies (current and lead of tax rate)
were used to distinguish purchases from consumption following the method
16
The time trend would be a good proxy for capturing the eﬀect caused by policy change.
However, GMM instruments need stationary variables; thus, only dummy variables wereused here.
17
See The History of the Japanese Tobacco Monopoly (in Japanese, Nihon Tabako
Senbaishi).
18
Auld and Grootendorst (2004, p. 1125, ln. 1-3) have noted that the estimable RA
model tends to yield spurious evidence when aggregate data are used; if, however, prices
are exogenous, instrumental variable estimates of the coeﬃcients on the lag and lead of
consumption will be consistent. Cigarette consumption in Japan would be an exceptional
case.

15

of Wan (2005).

5

Empirical Results

5.1

Cigarette consumption

The parameter estimates of RA and non-addiction models are reported inTable 3. The RA models (models 1 and 2) were estimated by the GMM.
The non-addiction model (Model 3) was estimated by OLS to test whether
the eﬀects of anti-smoking policies were changed by the model selection.
The results of these three models showed little diﬀerence, except for the
addictiveness.
In the columns for models 1 and 2, the coeﬃcients of Ct−1 and Ct+1 werepositive and signiﬁcant. The coeﬃcient of Pt was signiﬁcantly negative. The
estimated values satisﬁed the stability conditions. Thus, these results are
consistent with the RA model. The coeﬃcient of ∆Yt was not signiﬁcant inModel 1 or in Model 2.19 The coeﬃcient of U S Report was positive but notsigniﬁcant.
The coeﬃcients of N icotine-tar release and W arning1 were positiveand signiﬁcant. It appears that consumers shifted to low nicotine/tar andﬁlter types of cigarettes after information on nicotine and tar had been
disclosed, as shown in ﬁgures 1 and 2; however, consumers maintained orincreased consumption of cigarettes to maintain their intake of nicotine.20
The coeﬃcient of W orkplace was negative and signiﬁcant, implying that thesmoking ban policy was eﬀective. The coeﬃcient of Research was negativeand signiﬁcant. Thus, cigarette research has a negative eﬀect on cigarette
19∆Yt /Yt was also used to capture the income eﬀect. The estimated coeﬃcient of income
was not signiﬁcant, and the coeﬃcients of other variables were almost unchanged.
20
Consumers also maintained their intake of tar because low-nicotine brands always
have low tar.

16

consumption, as expected. The coeﬃcients of Report1 and W arning2 were
negative and signiﬁcant. The coeﬃcient of Report2 was negative but notsigniﬁcant. This result can be interpreted as follows: consumers decreased
consumption in response to disclosures of health damage information. According to Figure 2, average nicotine and tar per cigarette declined only
slightly and was quite stable after the 1980s. The consumer had to reduce
consumption to adjust the stock of nicotine and tar gradually, in responseto new health hazard information. This behavior is consistent with the RA
prediction.
The coeﬃcient of Dummy7504 was signiﬁcantly positive, implying that
consumers hoarded cigarettes when tax increase proposals were passed. The
coeﬃcient of Dummy7509 was not signiﬁcant. The coeﬃcient of Hoarding
was positive, signiﬁcant, and large, while the coeﬃcient of Stock was negative, signiﬁcant, and large. Thus, consumers took future price information
into account and hoarded cigarettes just before the price increase. This result is similar to results found by Wan (2005).

Robust test using the non-addiction model
By the RA model, current consumption depended on past and future
consumption. Thus, consumption changed only gradually. It is possiblethat the RA model makes it diﬃcult for the consumers to respond in atimely manner to health information and regulations. A standard model(Model 3) was also applied, but results were very close to those of the RA
model. Consumer responses to information on price and health suggest thatsmoking behavior is consistent with the RA prediction regarding the eﬀects
of health information.

17

Robust test for small β
The value of β implied by the results in Table 3 was too small.21 Estimating β precisely for a speciﬁc good is considered diﬃcult.22 Here, adiscount factor was imposed a priori to estimate the RA model (Model 2)again. Table 4a lists the long-run price elasticities. Long-run price elasticities were stable when β was changed from 0.4 to 0.95 and were very close
to those of Model 2 shown in Table 3.

Elasticity and rate of contribution of each factor
The estimated coeﬃcients and sample means in Table 2a were used toestimate the short- and long-run price elasticities,23 which are shown in therows labeledshort-run 

andlong-run .

The long-run price elasticity

was approximately 2.055 times as large as the short-run price elasticity, andclose to the estimate based on annual data.24
The elasticities of all variables based on Model 1 are summarized incolumns 3 and 4 of Table 4b. Using the mean and the relative changeof each variable, the contribution rate of each factor was calculated basedon the long-run elasticity. The results are summarized in columns 5-8 ofTable 4b. Here, ∆C/C̄ = (COct.1999 − CJan.1951 )/C̄ = 0.397, ∆P/P̄ =(POct.1999 − PJan.1951 )/P̄ = − 1.441. When t = six periods, the absolute
21
Becker et al. (1994) found similar results for the time discount parameter from thissort of test.
22
As shown in Footnote 10, the information eﬀect may cause this small β. here I do notmake this test but I plan to do it in a new research.
23
The results diﬀered from those by Haden (1990). Haden estimated the price andincome elasticities of Japanese cigarette consumption using annual data for 1964-1983.
Income elasticity was estimated to be 0.161 and the price elasticity to be −0.948. Thus,
cigarettes are a normal good. The results presented in this paper also diﬀer from those by
Yorozu and Zhou (2002), who estimated the income and price elasticities of demand forcigarettes to be 0.291 and −0.986, respectively. According to Gruber and Köszegi (2001),
the long-run price elasticity in the U.S. (based on monthly data) is −0.8, while here thelong-run price elasticity in Japan was estimated to be −0.524. Thus, the absolute valueof the long-run price elasticity was somewhat smaller in Japan than in the U.S.
24
The long-run elasticity was approximately −0.67, see Wan (forthcoming).

18

value of elasticity was larger than that for 90% of the long-run elasticity.
The contribution rates oftax related,

information related,

andcontrol policy related were approximately 166.24%, 45.89%, and −66.37%,
respectively. The summation of the contribution rate of information related
and control policy related was −20.48%. This means that anti-smoking
policies have reduced consumption, but the decreasing price has increased
consumption.

5.2

Nicotine and tar intake

Data on nicotine and tar price were unavailable; thus, cigarette price wasused as a proxy for the price of nicotine. The intake of nicotine and tar
was estimated with the RA model by GMM. Three lags and three leadsof cigarette price, two lags and two leads of cigarette tax rate, and otherexplanatory variables were used as instruments. The results are reported inTable 5.25
In the column for nicotine intake, the coeﬃcient of Pt was signiﬁcantly
negative and the short- and long-run price elasticities were -0.377 and 0.863, respectively. The stability conditions were satisﬁed. The coeﬃcientof hoarding was signiﬁcantly positive, and the coeﬃcient of stock was significantly negative. The coeﬃcients of Ct−1 , Ct+1 were signiﬁcantly positive.
Thus, these results are consistent with the RA model. The coeﬃcient of
N icotine-tar release was signiﬁcantly positive, implying that the release of
nicotine and tar content signiﬁcantly increased the intake of nicotine. The
other variables, W arning1, W orkplace ban, Research, Report1, W arning2,
and Report2 had a signiﬁcantly negative impact on nicotine intake.
The column for tar intake shows that the coeﬃcient of Pt was signif25∆Yt /Yt was also used to capture the income eﬀect. The estimated coeﬃcient of income
was not signiﬁcant, and the coeﬃcients of other variables were almost unchanged.

19icantly negative and the short- and long-run price elasticities were -0.401
and -0.844, respectively. The stability conditions were satisﬁed. The coeﬃcient of hoarding was signiﬁcantly positive, and the coeﬃcient of stock wassigniﬁcantly negative. The coeﬃcients of Ct−1 and Ct+1 were positive andsigniﬁcant. Thus, these results are consistent with the RA model. The coefﬁcients of U S Report and N icotine-tar release were signiﬁcantly positive,
implying that the U S Report and the release of nicotine and tar content
information signiﬁcantly increased the intake of tar. The other variables,
W arning1, W orkplace ban, Research, Report1, W arning2, and Report2
had signiﬁcantly negative impacts on tar intake.
Note that the sign of the coeﬃcient of W arning1 was inverse to thatfor cigarette consumption, as shown in Table 3. Consumption increased
in 1972, but the intake of nicotine and tar decreased. This implies thatthe consumer switched to low nicotine and tar brands but consumed morecigarettes to keep up the intake of nicotine and tar. This compensative
behavior is consistent with nicotine s addictive nature. From ﬁgures 1, 2,
and 3, it is clear that structural changes in nicotine and tar intake took
place in the mid-1960s, when the U.S. report and release of nicotine andtar content were implemented.26 These results are consistent with those forcigarette consumption and also with those of inter-brand cigarette demands
found by Wan (2004).

6

Conclusions and Policy Implications

The Japanese government has implemented a number of anti-smoking policies, including the dissemination of information on the negative health im26

A Chow test was also performed and conﬁrmed this structural change. The estimation
results are available upon request.

20

pacts of smoking, taxation of cigarettes, and smoking bans. Such antismoking measures have increased over time. To assess these policy eﬀects,
this study theoretically and empirically examined smoking behavior, simultaneously, by ﬁrst considering addictiveness, health information, taxation,and regulations, such as smoking bans. Theoretically, the consumer overconsumes cigarettes because of a shortage of health information and reduces
consumption when new information is announced. The estimation results
based on monthly consumption data on cigarettes, nicotine, and tar by
Japanese salaried worker households and several policy events were basically consistent with the predictions of the RA model for health information
and also consistent with the results of Japan s national smoking surveys.
Consumers responded to increased health information by changing theircigarette type and reducing or quitting smoking.

The share of ﬁlteredcigarettes has been increasing since the 1960s, following the ﬁrst oﬃcial
information disclosure on cigarettes and health in Japan. More consumers
have also switched to low-nicotine and low-tar cigarettes since newspaper
releases of data on nicotine and tar in 1967; however, nicotine addiction has
led consumers to raise their consumption of cigarettes to maintain nicotine
intake. The printing of smoking is harmful to health on cigarette packaging since 1972 has strengthened the consumer switch to lower tar/nicotine
cigarettes but has compensatively raised total consumption to maintain nicotine intake. Other tobacco control policies since 1972, including workplacesmoking bans, smoking science research, health warnings, nicotine labeling,
and reports on smoking, have been eﬀective in reducing nicotine and tar
intake.27 Anti-smoking policies have reduced consumption, but price de27
The 1967 information release has implicitly had a negative impact on nicotine andtar intake since 1972 because the consumer could not choose his or her preferred brands
based on nicotine and tar information if the tar contents in 1967 had not been released.

21

creases have increased consumption. The contribution rate of anti-smoking
policies to the reduction of cigarette consumption from 1951 to 1999 was−20.48%.
These analyses have shown that health information, tax increases, andsmoking bans are all eﬀective for tobacco control. Long-run policies have
had as much as double the eﬀect of short-run policies. Compared to residents
of other Westernized countries, the Japanese have less knowledge about how
smoking aﬀects heart disease and other health problems.28 It appears thatpeople in Japan generally have inadequate knowledge of the health hazards of smoking. The cigarette tax rate in Japan is also still rather low.
Hence, the Japanese government should continue its anti-smoking policies
and, in particular, strengthen information dissemination and taxation programs. Other smoking bans are also considered to be useful. Additionally,broad and comprehensive implementation of FCTC policies in Japan shouldhave a considerable positive impact.
This study used several dummies as proxies for anti-smoking events.
Other approaches such as an updating process based on Bayesian mean
and variance methods would be a good measure of transition in consumer
belief.29 The consumer may be hyperbolic, as proposed by Gruber andKöszegi (2001). The welfare change arising from health information andtaxation was not analyzed here in detail.30 These issues are topics for future
research.

28

As shown in Viscusi (1992), 81% in 1977 and 83% in 1981 of all respondents knew
smoking is one cause of lung cancer, and 68% in 1977 and 74% in 1981 responded thatsmoking is one cause of heart disease in the U.S.
29
See Chern (1995) for details.
30
There are a number of studies, such as that by Ikeda and Gombi (2003), that haveanalyzed the change in consumer welfare within the framework of rational habit formation.

22

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Grossman, Michael. On the Concept of Health Capital and the Demand for
Health. Journal of Political Economy 1972; 80(2): 223-255.
Gruber, Jonathan, Köszegi Botond. Is Addiction

Rational ? Theory andEvidence. Quarterly Journal of Economics 2001; 116(4): 1261-1303.
Haden, Kim. The Demand for Cigarettes in Japan. American Journal of
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Hansen, L.P. Large Sample Properties of Generalized Method of Moments
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Ikeda, Kazuo, Yoko Nadaoka, Nubuyuki Kamiya and Masako Hirokado.
Estimate of the Number of Deaths caused by Malignant Neoplasms
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Statistics Bureau and Statistics Center, Government of Japan. Consumer
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Stigler, George J. and Becker, Gary S. De Gustibus Non Est Disputandum.
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Wan, Junmin. An Analysis of Cigarette Consumption in Japan. Masters Thesis, Graduate School of Economics, Osaka University, December
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26

Appendix: Surveys
1978 Survey on Smoking
An opinion poll on smoking was conducted by the Mainichi Shimbun Corporation (Mainichi Newspaper) in April 1978. The 2,176 pollees were randomly
chosen from among persons aged 20 and over in Japan and were interviewed
by the polltakers. The response rate was 73%. The smoking rate of adultmales was 75% and that of adult females was 13%. These results are broadly
consistent with the results of the Japan Tobacco, Inc. survey, in which themale smoking rate was 74.7% and the female rate was 16.2%. Respondents
What do you regard as the harmful

were asked the following question:eﬀects of smoking?

There were 12 items from which to choose and morethan one item could be chosen.

1981 National Survey on Smoking
This survey (in Japanese, Kitsuen ni Kansuru Zenkoku Ishiki Chosa) was
conducted by Tadao Shimao, the chief researcher at the Research Instituteof Tuberculosis, Japan Anti-Tuberculosis Association, in 1981. The survey
encompassed 5,394 adult persons, who were family members or friends ofmembers of the 47 branches of the Japan Anti-Tuberculosis Association in
all prefectures of Japan. The survey was conducted from Feb. 1981 to Mar.
1981 using a self-registering paper questionnaire method. There were 2,933
male respondents (54.3% of the total) and 2,461 female respondents (45.6%of the total). The male and female shares in the total population were 49.2%
and 50.8%, respectively, in Oct. 1980.

27

1988 Survey on Smoking and HealthThis survey (in Japanese, Kitsuen to Kenkou ni Kansuru Yoron Chosa) was
conducted by the Public Relations Oﬃce of the Prime Minister s Oﬃce,
Japan, from 27 October to 6 November 1988. The survey targeted 2,339
persons, aged 20 and over. Survey recipients were selected from throughout
Japan using a two-stage stratiﬁed random sampling method. The response
rate for the direct-interview survey was 78.0%.

1999 National Survey on Smoking and HealthThis survey was conducted by the Ministry of Health, Labor, and Welfareof Japan from February 17 to March 2, 1999 and targeted 12,858 persons
aged 15 and over. Recipients were randomly selected from the sample used
for the 1998 Basic Survey on National Life in ﬁscal year 1998. The response
rate was 91.9%, and respondents were interviewed directly. The smoking
rate was 52.8% for adult males and 13.4% for adult females. These results
are very close to those of the Japan Tobacco Inc. survey, in which rates
were 55.2% for males and 13.3% for females. Respondents were asked thefollowing question: What do you regard as the harmful eﬀects of smoking?
There were eight answers from which to choose and more than one could bechosen.

28

Table 1a The proportions of those who know about the damage from smoking(Asymptotic t statistics in parentheses)
all respondents
Lung cancer
Bronchitis
Heart disease
Influence on pregnacy

survey 1978
66%
45%
16%
20%

survey 1999
84.5%
65.5%
40.5%
79.6%

difference (test statistics)
22.5% (17.38)***
20.5% (17.39)***24.5% (27.31)***
59.6% (64.21)***

Tobacco dependence
smokers

44%

51.8%

7.8% (6.77)***

Lung cancer
Bronchitis
Heart disease
Influence on pregnacy
Tobacco dependence
non-smokers
Lung cancer
Bronchitis

65%
45%
18%
10%
43%

75%
50%
37%
72%
55%

10% (5.90)***5% (2.77)***19% (12.92)***62% (51.02)***
12% (6.69)***

67%
46%

89.6%
69.2%

22.6% (16.23)***
23.2% (15.22)***

Heart disease

15%

42.5%

27.5% (23.47)***

Influence on pregnacy
Tobacco dependence

28%
46%

85.4%
50.3%

57.4% (42.54)***
4.3% (2.791)***

Note: ***: significant at 1% level; **: significant at 5% level; *: significant at 10% level.
Table 1b Results of ``Why do you want to reduce or quit smoking?''(Asymptotic t statistics in parentheses)smokers

survey1981

survey1988

survey1999

D1

D2

harmful to health

55.7%

78.6%

85.5%

22.9%
(12.61)***

6.9%(4.30)***

costs a lot

6.2%

9.0%

39.2%

2.8%
(2.42)***

30.2%(22.98)***people around me do
not want me to smoke

6.1%

20.3%

29.3%

14.2%
(9.16)***

9.0%(5.47)***

advised by family
members, etc.

6.2%

12.6%

14.5%

6.4%
(4.88)***

1.9%(1.42)**

advised by doctors

4.5%

na

10.5%

na

na

smoking ban in public
areas

na

11.5%

13.1%

na

1.6%

prohibition at one's
workplacena(1.24)
na

2.4%

na

na

Note: ***: significant at 1% level; **: significant at 5% level; *: significant at 10% level; `D1': the gap
between the figures for the 1981 and 1988 surveys; `D2': the gap between the figures for the 1988 and1989 surveys; `na' means `not available' or `no data.'

29

Table 2a Summary statistics, Jan. 1951- Oct. 1999
Variable

Mean

Std.Div.

Max.

Min.

Ct

1.447

1.074

5.225

0.688

Nicotine intaket

37.54913.555136.363

13.599Tar intaket

483.872

187.1416

1789.434

160.218

Pt

3.104

1.097

6.942

1.72

Yt

8.724

3.658

14.428

1.924

∆Yt

0.02

0.231

1.135

-1.375

Taxt

0.002

0.025

0.491

0

Note: `Max.' and `Min.' are maximum value and mimimum value, respectively; Ct is denominated in
number of packs; Pt is denominated in units of 100 yen per pack; Tax t is the rate of tax increase, which
is not seasonally adjusted.

Table 2b Unit root tests (ADF and Phillips-Perron), Jan. 1951- Oct. 1999
ADF test

Variable

Phillips-Perron test

Lag length(Test statistics)

Lag length(Test statistics)

Ct

1(-4.094)***5(-5.692)***

Nicotine intaket

1(-3.498)***5(-4.704)***

Tar intaket

1(-3.381)**5(-4.447)***Pt

2(-1.040)***5(-4.967)***Yt

5(-2.249)5(-1.677)∆Yt

5(-14.667)***

5(-57.119)***

Taxt

4

(-10.956)***

5(-24.318)***

Note: ***: significant at 1% level; **: significant at 5% level; *: significant at 10% level; The tests of
ADF and Phillips-Perron for unit roots are in levels; No trend but an intercept is included in the test
equations.

30

Table 3 Estimates of rational addiction and non-addiction model with health information and othertobacco control policies, Dependent Variable = C t, with distinction between purchase and consumption.
(Asymptotic t statistics in parentheses) Jan. 1951- Oct. 1999
(EventTime)

Independent
Variable

Model 1Model 2

coef. (t-stat.)

Model 3coef. (t-stat.)coef. (t-stat.)

Constant
Ct-1
Ct+1

***

0.870 (7.871)
0.517 (18.357)***0.024 (1.966)*****

0.959 (9.597)
0.508 (16.870)***0.022 (1.694)*

2.515 (16.126)***Pt-0.098 (-5.115)***-0.115 (-7.060)***-0.347 (-10.287)***∆Yt

0.000 (-0.024)

0.000 (0.038)

0.001 (0.148)(Jan. 1964) US_Report

0.026 (1.289)-0.038 (-0.693)(Apr. 1975) Dummy7504

0.215 (12.505)(Sept. 1975) Dummy7509

0.04 (1.944)*

***

***

0.210 (12.573)***

0.033 (1.692)*

0.569 (10.428)***0.094 (1.516)***

0.161 (3.170)***(Apr. 1967) Nicotine-tar release

0.142 (6.369)(Aug. 1971) Warning1

0.147 (4.660)***0.138 (4.762)***0.159 (3.180)***(Apr. 1978) Workplace ban-0.068 (-3.370)***-0.069 (-3.414)***-0.101 (-2.455)**(Apr. 1986) Research-0.107 (-3.536)***-0.104 (-3.410)***-0.135 (-2.566)**(Oct. 1987) Report1-0.095 (-2.713)***-0.1 (-2.793)***-0.192 (-3.430)***(Jan. 1990) Warning2-0.075 (-3.336)***-0.079 (-3.371)***-0.193 (-3.673)***(Jun. 1993) Report2-0.024 (-1.500)-0.025 (-1.505)-0.061 (-1.304)

Hoarding

6.011 (33.187)***5.946 (32.051)***6.207 (49.756)***Stock-5.585 (-29.948)***-5.514 (-28.693)***-1.618 (-14.194)***４θ2β-1<0(-35.742)***(-34.670)***φ1-1<0φ2-1>0(-77.741)***(8.163)***(-74.721)***(7.659)***short-run ε-0.218 (-5.296)***-0.255 (-7.540)***-0.745 (-10.286)***long-run ε-0.458 (-6.379)***-0.524 (-10.520)***-0.745 (-10.286)***

Adjust R2

0.978

0.978

0.978

D-W Stat.

1.982

1.984

2.296

J-Stat.
Obs.

0.01

0.009

580

580

0.148 (6.723)

583

Note: ***: significant at 1% level; **: significant at 5% level; *: significant at 10% level; The
instruments of Models 1 and 2: three lags and three leads of price, two lags and two leads of tax rate,other explanatory variables; the p-value for the J-test of Models 1 and 2 is 1, respectively.

31

Table 4a Robustness test, impose β a priori (Model 2)
β

0.950

0.900

0.800

0.700

0.600

0.500

0.400

long-run ε

0.564

0.572

0.557

0.548

0.556

0.550

0.551

Note: Long-run ε calculated by GMM estimates.

Table 4b Short- and long-run elasticity, rate of contribution of each factor Jan. 1951 - Oct. 1999

Tax relatedInformation
relatedX(variable)

short-runelong-rune∆X/X

long-run e
×∆X/X

P

-0.218-0.458-1.441

0.660

166.24%

US_report

0.019

0.039

1

0.039

9.86%

Release of
nicotine
and tar

0.102

0.214

1

0.214

53.85%

Warning1

0.105

0.221

1

0.221

55.75%

Report1-0.068-0.1431-0.143-36.03%Warning2-0.054-0.113

1-0.113-28.44%

Report2-0.017-0.0361-0.036-9.10%-0.049-0.1021-0.102-25.79%WorkplaceControl policy ban
relatedtotal effectcontribution (sumation ofcontribution
rate of X
rate)

Research

166.24%45.89%-66.37%-0.077-0.161

1-0.161-40.58%Other factors-0.182-45.76%-45.76%

Total

0.397

100%

100%

Note: Author's calculation by estimated coefficients of Model 1 in Table 3. Here, ∆C／C = (C1999 - C1951)／mean of C = 0.397, ∆P／P=(P1999 - P1951)／mean of P = -1.441. When t = six periods, the absolutevalue of elasticity is larger than the one of 90% of long-run elasticity.

32

Table 5 Estimates of intake of nicotine and tar with health information and other tobacco control
policies, Dependent Variable = nicotine intake, tar intake, rational addiction model with distinction
between purchase and consumption.
(Asymptotic t statistics in parentheses) Jan. 1951- Oct. 1999
Independent
Variable

Dep. var. = nicotine intake
coef. (t-stat.)Dep. var. = tar intake
coef. (t-stat.)

Constant

33.875 (8.899)***456.565 (8.164)***

Ct-1

0.552 (13.125)***0.516 (10.041)***Ct+1

0.034 (2.090)**0.031 (1.897)*

Pt-4.314 (-8.001)***-59.477 (-7.443)***∆Yt

0.136 (0.464)

1.706 (0.707)(Jan. 1964)

US_Report

0.214 (0.472)

11.663 (1.670)*(Apr. 1975)

Dummy7504

3.662 (1.753)*

56.201 (2.129)**(Sept. 1975)

Dummy7509-1.326 (1.598)-10.986 (-1.003)(Apr. 1967)

Nicotine-tar release

1.278 (3.350)***19.698 (2.853)***(Aug. 1971)

Warning1-1.850 (-2.810)***-19.901 (-2.701)***(Apr. 1978)

Workplace ban-7.472 (-7.882)***-66.915 (-6.383)***(Apr. 1986)

Research-1.933 (-3.222)***-46.238 (-4.527)***(Oct. 1987)

Report1-1.407 (-2.675)***-37.637 (-3.593)***(Jan. 1990)

Warning2-2.279 (-4.864)***-42.678 (-4.3.371)***(Jun. 1993)

Report2-2.454 (-5.497)***-32.294 (-4.845)***

Hoarding

148.863 (32.026)***

2003.402 (40.823)***Stock-148.271 (-17.899)***-1876.310 (-16.222)***４θ2β-1<0(-25.827)***(-27.594)***φ1-1<0(-56.932)***(-56.726)***

φ2-1>0(5.662)***(4.724)***

short-run ε-0.377 (-8.451)***-0.401 (-7.745)***long-run ε-0.863 (-14.910)***-0.844 (-14.298)***(EventTime)

Adjust R2

0.979

0.982

D-W Stat.

1.845

1.671

J-Stat.

0.014

0.011

Obs.

580

580

Note: ***: significant at 1% level; **: significant at 5% level; *: significant at 10% level; The
instruments of columns 3 and 4: three lags and three leads of price, two lags and two leads of tax
rate, other explanatory variables; the p-value for the J-test of columns 3 and 4 is 1, respectively.

33

100

100

80

80

60

60

40

40

20

20

0

0

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19

Source: The History of Tobacco Monopoly, The Budget of a Country and Author's calculation

34

Share of charcoal filter cigarettes

Share of filter cigarettes

Figure 1 The share of filter cigarettes in total sales 1951-84 and charcoal filter cigarettes in total sales of filter brands 1970-84

Share of filter
cigarettes intotal sales(percent)

Share ofcharcoal filter
cigarettes intotal sales offilter brands(percent)

Figure 2 The nicotine and tar level 1951-1999

30

2.5

25
2

20

Tar level

15

Nicotine level(minigrams per
cigarette)

1
10

0.5
5

0

0

Ja
nSe 51
p
M -52
ay
Ja 54
nSe 56
p
M -57
ay
Ja 59
nSe 61
p
M -62
ay
Ja 64
nSe 66
p
M -67
ay
Ja 69
nSe 71
p
M -72
ay
Ja 74
nSe 76
p
M -77
ay
Ja 79
nSe 81
p
M -82
ay
Ja 84
nSe 86
p
M -87
ay
Ja 89
nSe 91
p
M -92
ay
Ja 94
nSe 96
p
M -97
ay
-9
9

Nicotine level

1.5

Source: The History of Tobacco Monopoly, The Japanese Tobacco Association and Author's calculation

35

Tar level(minigrams per
cigarette)Figure 3 The nicotine and tar intake level 1951-1999

160

2000
1800

140

1600
120
1400

1000
800

60

600
40
400
20

200

Se
p-

53
M
ay
-5
6
Ja
n59
Se
p61
M
ay
-6
4
Ja
n67
Se
p69
M
ay
-7
2
Ja
n75
Se
p77
M
ay
-8
0
Ja
n83
Se
p85
M
ay
-8
8
Ja
n91
Se
p93
M
ay
-9
6
Ja
n99

0

-5
1

0

Source: The History of Tobacco Monopoly, Japanese Tobacco Association and Author's calculation

36

Tar intake

1200

80

Ja
n

Nicotine intake

100

Nicotine
intake(minigrams
per capita)
Tar intake(minigrams
per capita)