The Effect of Health Information on Cigarette Consumption : Evidence from British Panel Data.

This paper presents and tests a model of cigarette consumption which mixes two types of intertemporal dependencies : habit-formation and learning about the health conseqences of smoking. This latter is argued to result from the observation of health developments, both one's own and those of other smokers in the same household. Using seven waves of British Household Panel Survey data, we present results consistent with habit-formation, but joint with learning about smoking's health risks. We find some effect from the individual's own health developments, but little effect from health developments amongst other smokers. Public health policy may therefore have a greater impact on smokers' behaviour through the delivery of personalised health information, for example through the medical profession, than through impersonal information provision, such as advertising campaigns.