Do Cigarette Taxes and Smoke-Free Air Laws Affect Subjective Well-Being?

The relationship between smoking restrictions, cigarette taxation, and individual well-being has significant implications for establishing whether observed behavior is consistent with various theoretical models of addiction. For example, under rational addiction models, higher taxation and smoking bans should reduce the welfare of perfectly forward-looking smokers. Alternatively, models that assume smoker preferences are inconsistent over time predict that smokers will be better off after the introduction of smoking bans or cigarette tax increases. An extensive literature documents the relationship between smoking bans, tobacco taxation, and changes in smoking behaviors. However, the few studies that estimate the impact of smoking bans and cigarette taxes on the subjective well-being of smokers and nonsmokers have failed to reach a consensus.

In this paper we investigate the temporal impacts of smoking bans and cigarette taxes on the subjective well-being of smokers and nonsmokers. Our research question is motivated by the fact that such policies often generate significant anticipatory effects, which, while typically overlooked, could bias traditional difference-in-differences estimates. Similarly, initial welfare effects may be temporary as smokers and nonsmokers adapt to changes in tobacco policy over time. Failure to account for these changes could significantly alter the interpretation of the relationship between smoking restrictions, cigarette taxation, and individual satisfaction. We also contribute to the literature on smoking bans and cigarette use by constructing county-level measures of the population share exposed to worksite, bar, or restaurant smoking restrictions. The fact that many state-level smoking bans are preceded by legislation at the municipal- or county-level suggests that previous studies relying solely on state-level data fail to account for variation in local smoking policies.

We use data from the Behavioral Risk Factor Surveillance System (BRFSS) and the Current Population Survey’s Tobacco Use Supplement (CPS-TUS) from 2005 through 2010 to estimate the effects of smoking bans and increased cigarette taxes on the well-being of smokers and nonsmokers. In addition, we estimate models that include lags and leads to measure changes in these relationships over time. Preliminary results suggest that, in contrast to models of time inconsistent preferences and hyperbolic discounting among smokers, cigarette tax increases do not improve smoker welfare. Our findings consistently show that smokers exposed to higher cigarette taxes report lower levels of life-satisfaction. Additionally, while nonsmokers are made better off when restaurant or bar smoking bans are introduced, the well-being of smokers declines. However, we largely find these effects to be temporary and, for smokers, to be preceded by an anticipatory reduction in reported satisfaction levels. Our analysis indicates that the average effects associated with smoking restrictions reported in previous studies may be masking changes over time in the association between these policies and individual well-being. The policy implications of these findings extend to issues concerning the optimal taxation of tobacco products and the potential welfare effects of smoke-free legislation.