Class 12: Smoking and Demand Elasticity

The goal of this module is to understand instrumental variables as a causal identification strategy. We’ll do this in the context of smoking and cigarette prices. Effectively, we want to estimate a demand curve for cigarettes, accounting for the fact that movements in quantity and price derive from changes in both supply and demand.

Readings and other links

Links to papers are listed alongside the full reference.

• Required readings for this module:
  • Chapter 7 of Causal Inference: The Mixtape
  • Chapter 19 of The Effect: An Introduction to Research Design and Causality
• Supplemental information and readings:
  • Chapter 4 of (Angrist and Pischke 2009)
  • (Gruber 2001). Paper link here.
  • (Ross and Chaloupka 2003). Paper link here
• Data for this module:
  • CDC Tax Burden on Tobacco

Objectives

• Explain some of the history of smoking in the U.S.
• Describe the empirical barriers to estimating demand curves

Activities

• Review homework 2 and matching/weighting in practice

References

Angrist, J., and J. Pischke. 2009. Mostly Harmless Econometrics. Princeton, NJ: Princeton University Press.

Gruber, Jonathan. 2001. “Tobacco at the Crossroads: The Past and Future of Smoking Regulation in the United States.” Journal of Economic Perspectives 15 (2): 193–212.

Ross, Hana, and Frank J Chaloupka. 2003. “The Effect of Cigarette Prices on Youth Smoking.” Health Economics 12 (3): 217–30.