THE ECONOMIC EFFECT OF BANNING SMOKING IN WISCONSIN'S BARS AND RESTAURANTS

I. INTRODUCTION Since the enactment of the first municipal smoking ban in 1990. 35 states across the country have completely banned smoking in all public bars and restaurants. The impetus for these bans has come from years of research that has linked tobacco smoke to negative health outcomes (Eisner, Smith. and Blanc 1998). While it is clear that smoking bans have the potential to lead to improvements in public health, they may also have adverse economic effects on the bar and restaurant industries, which must be taken into account. Numerous studies have been conducted in order to estimate these effects, but there is widespread disagreement amongst economists as to the true economic impact of government-imposed smoking bans. While state and local governments across the United States have continued to introduce legislation banning smoking in public places, they have faced fierce opposition from pro-tobacco interest groups and other organizations representing the interests of bar and restaurant owners. Critics of these bans have claimed that businesses are economically harmed and that business owners' rights are unjustly infringed upon by the government. Groups supporting the bans have claimed that these policies are necessary to protect the public interest. They claim that the negative impact of smoking on the health of patrons and employees provides ample justification for government intervention. In rebuttal to the opponents of smoking bans, they cite previous research which indicates that there are no adverse economic consequences to businesses affected by smoking bans, claiming that bans can produce an improvement in social welfare. The state of Wisconsin implemented its statewide smoking ban on July 5, 2010. The law, titled 2009 Wisconsin Act 12, prohibits smoking in enclosed public places and places of employment. Only cigar bars, tobacco shops, and tribal run casinos are exempt from the law. A person who smokes where it is prohibited is subject to a forfeiture of between $100 and $250 per offense and businesses can be fined $100 per day for failing to stop illegal smoking.' Since the law was enacted, there has been mixed anecdotal evidence as to the economic effects of the ban on the state's bars and restaurants. This article looks to determine the short-run economic effect of banning smoking in Wisconsin on the state's bars and restaurants, focusing on the changes in employment over the first year since the statewide ban was enacted. This is the first article to my knowledge that looks to answer this question since the implementation of the 2010 statewide ban. To do this, I conduct a difference-in-differences analysis using variation in the timing of smoking bans between counties affected by the statewide ban and counties that had municipal bans implemented prior to the statewide ban. I use county-level employment data in the bar and restaurant industries as a way to measure the economic impact of the smoking ban. I find that bar employment is negatively affected when a smoking ban is enacted and that employment in restaurants shows no significant change as a result of smoking bans. I also assess the relationship that a county's smoking prevalence has on bar and restaurant employment. I find that counties with hither levels of smoking prevalence see greater reductions in bar employment as a result of smoking bans. This provides further evidence to support my finding that bars have been negatively affected by the smoking ban. Through the use of a fixed-effects regression model, I control for both time-variant unobservable factors that affect all counties in the same way and unobservable differences between counties that do not change over time. Adding a regressor that measures county-level total employment allows the model to control for county-level economic shocks that are not accounted for in the general fixed-effects model. The resulting analysis indicates that banning smoking in Wisconsin has had a negative economic effect on the state's bars, whereas the impact on restaurants is statistically insignificant. …