Is Smoking Inferior? Evidence from Variation in the Earned Income Tax Credit

46 Pages Posted: 6 May 2014

See all articles by Donald Kenkel

Donald Kenkel

Cornell University - Department of Policy Analysis & Management (PAM); National Bureau of Economic Research (NBER)

Maximilian D. Schmeiser

Amazon Lending

Carly Urban

Montana State University - Bozeman - Department of Agricultural Economics and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 2014

Abstract

In this paper we estimate the causal income elasticity of smoking participation, cessation, and cigarette demand conditional upon participation. Using an instrumental variables (IV) estimation strategy we find that smoking appears to be a normal good among low-income adults: higher instrumented income is associated with an increase in the number of cigarettes consumed and a decrease in smoking cessation. The magnitude and direction of the changes in the income coefficients from our OLS to IV estimates are consistent with the hypothesis that correlational estimates between income and smoking related outcomes are biased by unobservable characteristics that differentiate higher income smokers from lower income smokers.

Suggested Citation

Kenkel, Donald and Schmeiser, Maximilian D. and Urban, Carly, Is Smoking Inferior? Evidence from Variation in the Earned Income Tax Credit (May 2014). NBER Working Paper No. w20097. Available at SSRN: https://ssrn.com/abstract=2432839

Donald Kenkel (Contact Author)

Cornell University - Department of Policy Analysis & Management (PAM) ( email )

120 Martha Van Rensselaer Hall
Ithaca, NY 14853
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607-255-2594 (Phone)
607-255-4071 (Fax)

National Bureau of Economic Research (NBER)

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Maximilian D. Schmeiser

Amazon Lending ( email )

Seattle, WA 98144
United States

Carly Urban

Montana State University - Bozeman - Department of Agricultural Economics and Economics ( email )

Bozeman, MT 59717-2920
United States
4069942005 (Phone)

HOME PAGE: http://www.montana.edu/urban

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