Smoking and the Business Cycle: Evidence from Germany
28 Pages Posted: 31 Aug 2017
In this paper, we use data from the German Socio-Economic Panel to investigate the effect on cigarette consumption of macro-economic conditions in the form of regional unemployment rates. The results from our panel data models, several of which control for selection bias, indicate that the propensity to become a smoker increases significantly during an economic downturn, with an approximately 0.7 percentage point increase for each one percentage point rise in the unemployment rate. Conversely, conditional on the individual being a smoker, cigarette consumption decreases during recessions, with a one percentage point increase in the regional unemployment rate leading to an up to 0.8 percent decrease in consumption.
Keywords: business cycle, smoking, unemployment
JEL Classification: E32, I12, J22
Suggested Citation: Suggested Citation