Ever since the 1964 Surgeon General's report linking smoking to adverse health outcomes, federal, state, and local governments have implemented numerous policies aimed at reducing the prevalence of smoking and minimizing the incidence of cigarette-related externalities. Governments also have a longstanding tradition of regulating alcohol sales and consumption to minimize the incidence of alcohol-related externalities. This project theoretically and empirically examines whether and how smoking bans in bars and restaurants, which are a government regulation aimed at cigarette consumption, have had spillover effects on the amount and location of alcohol consumption and alcohol-related externalities (such as drunk driving, bar fights, and domestic violence). The theoretical analysis examines the implications for social welfare. The empirical analysis allows for the bans to have heterogeneous effects on the cigarette and alcohol consumption of different smoking and drinking "types". In theory, smoking bans should have heterogeneous effects on alcohol consumption depending on one's smoking status. If nonsmokers derive disutility from cigarette smoke, then a smoking ban in a bar will increase the marginal utility of drinking in a bar for a nonsmoker. And if smokers derive utility from smoking while they drink, then a smoking ban in a bar will lower the marginal utility of drinking in a bar for a smoker. Consequently, smoking bans change the marginal rate of substitution between drinking in a bar and drinking at home, with the effect going in opposite directions for smokers and nonsmokers. The effects of a smoking ban on an individual’s total alcohol consumption would then depend on whether drinking at a bar and drinking at home are complements (through habit formation or addiction) or substitutes.
In the first part of the paper, I estimate reduced-form difference-in-differences models to determine how these smoking bans affect the amount and location of alcohol consumption for different "types". The variation in the timing of smoking bans across jurisdictions is the identifying variation. I use the Behavioral Risk Factor Surveillance System to measure alcohol consumption by smoking status. I use the Nielsen Consumer Panel data to measure alcohol purchases for home consumption by smoking status. By combining these two datasets, I can back out the effect of smoking bans on alcohol consumption at a bar.
In the second part of the paper, I estimate the effects of these bans on alcohol-related externalities, such as drunk driving, domestic violence, and bar fights. I use data from the Fatality Analysis Reporting System and the Uniform Crime Reports for these outcomes.
In the third part of the paper, I construct a theoretical model of different "types" of smokers and drinkers and "competing" externalities (from smoking and drinking) to analyze these bans’ social welfare effects. What are the relative weights that a social planner would need to assign to the different "types" for this policy to be neutral from a social welfare perspective? Given certain relative weights, what are the effects on social welfare? How do smoking bans compare to alternative policies a social planner may implement, such as cigarette and alcohol taxes?
