Youth Smoking, Taxes, and Anti-Smoking Sentiment Jae-Young Lim Korea University

1. Youth Smoking, Taxes, and Anti-Smoking SentimentJae-Young LimKorea University

2. Prevalence of Thirty-day Cigarette Use in the U.S.

3. Healthy People 2010 • Reducecigarette use in the past month by 9th through 12th graders from 36% in 1997 to 16% in 2010. • Reduce initiation of tobacco use among children and adolescents. • Increase in combined federal and average state cigarette tax from $0.63 in 1998 to $2.00 in 2010.

4. The previous economic studies on youth smoking

5. Conventional wisdom • "The price of tobacco has an important influence on the demand for tobacco product, particularly among young people" (USDHHS 2000). • "If cigarette price were increased by 1% youth smoking participation would decrease by 0.68%" (Chaloupka and Grossman, 1996).

6. Recent controversy • Notable exceptions to the consensus: - Wasserman et al. (1991) - Douglas and Hariharan (1994) - Douglas (1998) - Gruber (1999) - DeCicca, Kenkel, and Mathios (2001)

7. State Cigarette Excise Tax Rates (As of January 1, 2000) MN 48¢ NY $1.11 KY 3¢ VA 2.5¢ NC 5¢ CA 87¢ TN 13¢ SC 7¢ AL 16.5¢ GA 12¢ FL 33.9¢

8. Research problem • Most previous economic studies rely on cross-sectional variation due to differences in state taxes to identify the price elasticities. • These cross-sectional studies estimate price effect without controlling for the unobservable state specific characteristics.

9. Research questions • Each state may have specific characteristics affecting youth in their state to smoke. • These state specific characteristics maybe correlated with state cigarette tax. • If correlated, the previous cross-sectional studies may yield biased estimates of the price effects.

10. Purpose of this study • Develop a new measure of state specific anti-smoking sentiment. • Re-estimate price effect on youth smoking with the additional control variable of state specific anti-smoking sentiment. • Suggest if higher price prevent youth from smoking.

11. Methodological approaches • Measure state specific anti-smoking sentiment. • Cross-sectional analysis - Include the measure of anti-smoking sentiment. • Longitudinal analysis - Include state fixed effects. - Include the measure of anti-smoking sentiment.

12. Measure of anti-smoking sentiment • The CPS Tobacco Use Supplement collected in September 1995 and May 1996. • Nine questions about smoking attitudes. • Conduct principal component analysis. • Use the estimated first component as a measure of state specific anti-smoking sentiment.

13. The CPS questions for smoking attitudes • "In restaurant, do you think that smoking should be allowed in all areas, in some areas, or not allowed at all?" • Ask the same questions for hospitals, indoor work areas, bars and cocktail lounges, indoor sporting events, and shopping mall.

14. Which statement best describe the rules about smoking in your home? -No one is allowed to smoke anywhere. - Smoking is allowed in some places or at some time. - Smoking is permitted anywhere • "Do you think that giving away free samples by tobacco companies/advertising tobacco products should be always allowed, allowed under some conditions, or not allowed at all?

21. Measure of youth smoking • The National Longitudinal Study of Adolescent Health (NLSAH). - The first wave: 20,745 7th-12th graders in 1995. - The second wave: 14,738 8th-12th graders in 1996.

22. Ever and current smoking • "Have you ever tried cigarette smoking even just one or two puffs?" • "During the past 30 days, on how many days did you smoke cigarettes?" • "During the past 30 days, on the days you smoked how many cigarettes did you smoke each day?"

23. Onset smoking • "How old were you when you smoked a whole cigarette for the first time?" • "How old were you when you first started smoking regularly?"

24. Cross-sectional analysis • Estimate two part model for current smoking. - Probit model for smoking participation. - Regression model for conditional consumption of cigarettes. • Estimate probit model for ever smoking.

27. Estimation strategy • Smokingijt = α0 + α1 Pricejt + α2 Xijt + εijt • Smokingijt = β0 + β1 Pricejt + β2 Xijt + β3 Anti-smoking Sentimentjt +εijt

28. Longitudinal analysis • Create longitudinal samples based on the retrospective information of age on onset of smoking. • Estimate discrete time hazard models. - Smoking experimentation. - Onset of regular smoking. - Onset of regular smoking for experimenters.

29. Control variables for the longitudinal analysis • Time varying variables: age, age2 , cigarette price, and year dummies. • Time constant variable: sex, race and ethnicities, number of siblings, family composition, urbanicity, region, the CPS measure of anti-smoking sentiment, and state dummies.

30. Estimation strategy • P (Smokingijt = 1) = Φ (α0 + α1 Pricejt + α2 Xijt ) • P (Smokingijt = 1) = Φ (β0 + β1 Pricejt + β2 Xijt + β3 State fixed effectsj ) • P (Smokingijt = 1) = Φ (γ0 + γ1 Pricejt + γ2 Xijt + γ3 Anti-smoking sentimentj )

31. The first finding • Without controlling for the state specific anti-smoking sentiment, estimated price effects are negative and generally significant. • With controlling for the state specific anti-smoking sentiment, estimated price effects are small or positive.

32. Smoking participation model in 1995

33. Smoking participation model in 1996

34. Conclusions • Previous cross-sectional economic studies may yield biased price effects. • Higher price may not prevent youth from smoking. • Increase of anti-smoking sentiment may be the better policy than increase of price for the prevention of youth smoking.