Class 13: Data on Smoking and Cigarette Prices

Today we’ll discuss demand estimation in the context of smoking. We’ll also introduce the idea of instrumental variables as a way to estimate causal effects when confronted with selection on unobservables.


  • Understand CDC and tax data sources
  • Introduce the idea of instrumental variables


  • Begin working with CDC Tax Burden data
  • Derive initial instrumental variables estimate
  • Define and explain the instrumental variable estimate as a ratio of a “reduced-form” to a “first-stage” estimate