Contributions to the empirical analysis of addictive behaviors

We show the estimable rational addiction model tends to yield spurious evidence in favor of the rational addiction hypothesis when aggregate data are used. Direct application of the canonical model yields results seemingly indicative that non-addictive commodities such as milk, eggs, and oranges are rationally addictive. Monte Carlo simulation demonstrates that such results are likely to obtain whenever the commodity under scrutiny exhibits high serial correlation, or when even a small amount of the variation in prices is endogenous, or when overidentified instrumental variables estimators are used, or when commonly imposed restrictions are employed. We conclude that time-series data will often be insufficient to differentiate rational addiction from serial correlation in the consumption series. Auld, M. C. and Zarrabi, M. (2009) Long term effects of tobacco taxes faced by adolescents. Manuscript (submitted to Health Economics). Abstract. We estimate the effects of tobacco prices faced in adolescence on smoking patterns of adults aged 19 to 40. Use of large repeated cross-sectional surveys in Canada in the early 2000s allows us to exploit substantial and plausibly exogenous tax changes across time and regions which occurred roughly a decade earlier. Results from a variety of econometric techniques suggest that there is a small but detectable long run effect of price faced during adolescence. A 10% increase in prices faced during adolescence, holding contemporaneous prices constant, leads to at most a 1% reduction in smoking propensity and intensity in early to mid adulthood, and we cannot reliably reject the hypothesis that the long term effect is zero. The results are sensitive to specification and to how price during adolescence is measured. We estimate the effects of tobacco prices faced in adolescence on smoking patterns of adults aged 19 to 40. Use of large repeated cross-sectional surveys in Canada in the early 2000s allows us to exploit substantial and plausibly exogenous tax changes across time and regions which occurred roughly a decade earlier. Results from a variety of econometric techniques suggest that there is a small but detectable long run effect of price faced during adolescence. A 10% increase in prices faced during adolescence, holding contemporaneous prices constant, leads to at most a 1% reduction in smoking propensity and intensity in early to mid adulthood, and we cannot reliably reject the hypothesis that the long term effect is zero. The results are sensitive to specification and to how price during adolescence is measured. Auld, M. C. (2005) Causal effect of early initiation on adolescent smoking patterns. Canadian Journal of Economics 38(3):709-34. Abstract. A key concern in policy debates over youth smoking is whether preventing children from smoking will stop them from smoking as adults or merely defer initiation into smoking. This paper estimates determinants of smoking status in late adolescence viewing smoking at age 14 as an endogenous treatment on subsequent smoking. This approach disentangles causation from unobserved heterogeneity and allows addictiveness to vary across individuals. Exploiting large tax changes across time and across regions in Canada in the early 1990s, the estimated model suggests that smoking is highly addictive for the average youth but less so for youths who actually do initiate early or who are likely to be induced to initiate early at the margin. Thus, policies that deter initiation will reduce eventual smoking rates, but not by as large a magnitude as conventional econometric models might suggest. A key concern in policy debates over youth smoking is whether preventing children from smoking will stop them from smoking as adults or merely defer initiation into smoking. This paper estimates determinants of smoking status in late adolescence viewing smoking at age 14 as an endogenous treatment on subsequent smoking. This approach disentangles causation from unobserved heterogeneity and allows addictiveness to vary across individuals. Exploiting large tax changes across time and across regions in Canada in the early 1990s, the estimated model suggests that smoking is highly addictive for the average youth but less so for youths who actually do initiate early or who are likely to be induced to initiate early at the margin. Thus, policies that deter initiation will reduce eventual smoking rates, but not by as large a magnitude as conventional econometric models might suggest. Journal of Health Economics 23 (2004) 1117–1133 An empirical analysis of milk addiction M. Christopher Auld a,∗, Paul Grootendorst b a Department of Economics, Faculty of Social Sciences, University of Calgary, Calgary, Alta., Canada T2N 1N4 b Faculty of Pharmacy, University of Toronto, Toronto, Canada Received 2 October 2003; accepted 26 February 2004 Available online 9 June 2004 Abstract We show the estimable rational addiction model tends to yield spurious evidence in favor of the rational addiction hypothesis when aggregate data are used. Direct application of the canonical model yields results seemingly indicative that non-addictive commodities such as milk, eggs, and oranges are rationally addictive. Monte Carlo simulation demonstrates that such results are likely to obtain whenever the commodity under scrutiny exhibits high serial correlation, or when even a small amount of the variation in prices is endogenous, or when overidentified instrumental variables estimators are used, or when commonly imposed restrictions are employed. We conclude that time-series data will often be insufficient to differentiate rational addiction from serial correlation in the consumption series. © 2004 Elsevier B.V. All rights reserved. JEL classification: C15; C32; I12We show the estimable rational addiction model tends to yield spurious evidence in favor of the rational addiction hypothesis when aggregate data are used. Direct application of the canonical model yields results seemingly indicative that non-addictive commodities such as milk, eggs, and oranges are rationally addictive. Monte Carlo simulation demonstrates that such results are likely to obtain whenever the commodity under scrutiny exhibits high serial correlation, or when even a small amount of the variation in prices is endogenous, or when overidentified instrumental variables estimators are used, or when commonly imposed restrictions are employed. We conclude that time-series data will often be insufficient to differentiate rational addiction from serial correlation in the consumption series. © 2004 Elsevier B.V. All rights reserved. JEL classification: C15; C32; I12