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WHY UNDERSTANDING SMOKING BANS IS IMPORTANT FOR ESTIMATING THEIR EFFECTS: CALIFORNIA’S RESTAURANT SMOKING BANS AND RESTAURANT SALES
Author(s) -
FLECK ROBERT K.,
HANSSEN F. ANDREW
Publication year - 2008
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2007.00080.x
Subject(s) - spurious relationship , causation , revenue , causality (physics) , advertising , pooling , tobacco industry , economics , affect (linguistics) , business , marketing , psychology , political science , law , physics , accounting , communication , quantum mechanics , machine learning , artificial intelligence , computer science
A large literature has sought to determine whether smoking bans help or hinder restaurants. Much of the literature improperly specifies its econometric equations and thus mistakenly infers causality. Examining the relationship between restaurant smoking bans and restaurant revenues in 267 California communities, we reach two main conclusions. First, California’s municipal restaurant smoking bans are endogenous in a critical way—restaurant sales growth (or something correlated with restaurant sales growth) appears to cause restaurant bans, not vice versa. Consequently, failure to control properly for trends can produce spurious “evidence” of causation. Second, ban heterogeneity (e.g., state versus local) can be exploited to sort out—or rule out—causal effects. In other words, pooling data and treating smoking bans implemented at different levels as homogenous (as many studies do) ignores an important source of information and is likely to lead to erroneous conclusions. Our analysis holds lessons for the many studies that have examined the arguably more important question of how smoking bans affect smoking rates. ( JEL L51)