The Demand for Cigarettes and Restrictions on Smoking in the Workplace

The purpose of this paper is to empirically test the effect that restrictive clean air laws have on the level of smoking. Restrictive clean air laws refers to the laws which prohibit smoking in private workplaces as well as in public places. The data employed in this study consist of a time series of cross sections of the fifty states of the U.S., and Washington D.C., over the time period from 1975 through 1985, Since states where sentiment is strongly against cigarettes are more likely to pass a clean air law, endogeneity between cigarette demand and the clean air law is a problem. A two step estimation model is used to control for endogeneity. Both a single equation and a two equation model of cigarette demand were estimated. The single equation results indicate that a clean air law has a significant negative effect on cigarette demand. However, the two equation model indicates that cigarette demand has a significant negative effect on the probability of passing a clean air law. The results indicate that when endogeneity is controlled for the clean air law dose not have a significant effect on cigarette demand. This does not imply that the enactment of a clean air law would not reduce the level of smoking if such a law were imposed in all states, but rather that only states with low levels of smoking are able to pass restrictive clean sir laws