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DO CHILDREN BENEFIT FROM INCREASING CIGARETTE TAXES? ACCOUNTING FOR THE ENDOGENEITY OF LUNG HEALTH AND ENVIRONMENTAL TOBACCO SMOKE EXPOSURE
Citation:
WILLIAMSON, J. M. DO CHILDREN BENEFIT FROM INCREASING CIGARETTE TAXES? ACCOUNTING FOR THE ENDOGENEITY OF LUNG HEALTH AND ENVIRONMENTAL TOBACCO SMOKE EXPOSURE. Presented at Eastern Economic Association Annual Conference, New York, NY, February 23 - 25, 2007.
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Description:
My research investigates the relationship between environmental tobacco smoke (ETS) exposure and lung function in children. I use detailed individual health data from the Third National Health and Nutrition Survey (NHANES III) to measure the effect of environmental tobacco smoke exposure on the continuous lung function of adolescent children. Previous research suggests that ETS exposure in early life contributes significantly to childhood morbidity; however, the question of causality with respect to exposure and lung function has yet to be clearly answered in observational studies. Because exposure is not random, I hypothesize two sources, unobserved heterogeneity in parents and selection effects, lead to bias in least squares estimates. To overcome this issue, I use an instrumental variables (IV) approach to estimate the effect of ETS on lung function. I combine NHANES III data with state-level cigarette tax data and use within-state variation in cigarette taxes over time to predict ETS exposure in children. I argue that cigarette taxes can be used as an instrument for exposure because such taxes are plausibly exogenous to children’s lung function and past research has shown smokers to be sensitive to prices. The results indicate that ETS exposure is sensitive to taxes, with an estimated price elasticity of between -0.28 and -0.94, although diagnostic tests indicate the tax instrument is weak. I find increased ETS exposure is associated with deficits in lung function, and the dose-response relationship in children’s lung function whereby a 10% increase in cotinine level reduces lung function by 0.1% to 1.9%, depending on the spirometric test. Finally, my IV results with endogenous exposure confirm the presence of endogenous exposure, and strengthen the evidence that ETS exposure causes deficits in the lung function of children. The results show that much of the literature on childhood exposure to ETS has produced underestimates of the true effect.