Date of Degree

9-2015

Document Type

Dissertation

Degree Name

Ph.D.

Program

Economics

Advisor(s)

Michael Grossman

Committee Members

Wim Vijverberg

Inas R. Kelly

Subject Categories

Economics

Abstract

Chapter 1, the primary focus of this essay is to use a long time series of state cross sections for the 1955-2009 time period in the United States in order to predict cigarette consumption. This essay updates estimates of the rational addiction model of cigarette consumption obtained by Gary Becker, Michael Grossman, and Kevin Murphy in their seminal 1994 American Economic Review paper. By using two types of prices, the cigarette price and the cigarette tax, and employing a cigarette demand function, I verify that smoking is a rationally addictive form of behavior. This is based on the theory that current smoking behavior is affected by both past and future smoking behaviors. Furthermore, I estimate long-run and short-run elasticities and find that the long-run elasticity is larger than that in the short run.

Chapter 2, the primary focus of this essay is to obtain new estimates of the price sensitivity of cigarette consumption and related outcomes using the 1979 cohort of the National Longitudinal Survey of Youth (NLSY79). This work expands on the existing literature on the topic by taking into account measures of time preference in the NLSY79 to examine interactions between these measures and price in the demand function for cigarettes. My specific hypothesis is that those who discount the future consequences of their current actions heavily are likely to be more sensitive to price than those who do not. I find that the people who discount the future heavily are more sensitive to price change.

Chapter 3, in this essay I explore the smoking behavior of pregnant women using the 1979 cohort of the National Longitudinal Survey of Youth (NLSY79). A key aspect of this research is the availability of smoking participation data before and during pregnancy. Thus, I consider the probabilities of quitting while pregnant as outcomes. I find that pregnant women who are cigarette consumers are less responsive to price changes because they are a future oriented group. Individuals who are more present-oriented are more likely to smoke and to consume more cigarettes given that they do smoke than those who are more future-oriented. Moreover, those who discount the future more heavily will be more sensitive to the money price of cigarettes than those who are more future-oriented. I find that a one percent change in the money price of cigarettes represents a larger percentage change in the full price for the former group. I focus on the role of time preference and the interaction between time preference and price in determining these outcomes.

Included in

Economics Commons

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