Income inequality and cigarette consumption: evidence from the United States

Abstract

There is enormous literature on the determinants of consumption of cigarettes and other tobacco products, and on the magnitude of the impact of a wide variety of economic and noneconomic factors. Also, a huge amount of research has been done on the association between income inequality and health for which numerous proxies have been used. We seek to link these two strands of scholarship by treating smoking as a major health hazard and considering the association between income inequality and smoking. Using US state-level data for the year 2004, we estimate an augmented model of cigarette consumption in which income inequality is added to a fairly standard specification. Subject to the caveats appropriate for such studies, there is little indication of a significant association between income inequality and the health-retarding behaviour in the form of cigarette smoking. Estimates for other variables are broadly consistent with similar studies.

Notes

¹ Manning et al. (1989) discuss some issues related to the health consequences of smoking.

² We also included another dummy variable to account for border contiguity with Canada. However, the estimated parameter lacked significance at almost any level and had no effect on the pattern of estimates reported in Table 3.

³ Following most literature on the subject, we treat recorded sales as reflecting consumption in the state. Also, our measure of border-state price is simple, and does not distinguish between areas that are closer to the border from those that are distant. Similarly, our proxy for contiguity with Mexico is very simple.

⁴ The test has been explained by Ramsey and Schmidt (1976). Additional details about the test are available from the authors.