The Impact of Lending, Borrowing, and Anti-Smoking Policies on Cigarette Consumption by Teens

Abstract

A major factor contributing to smoking initiation and experimentation by teenagers is the ability to 'bum' cigarettes. Yet research until now has ignored the impact of a lending/borrowing market on the smoking decisions of teenagers. In this paper, we develop a theoretical model where smoking decisions are determined by an individual's utility maximization process that includes an incentive to lend cigarettes. Predictions from this model are tested using data from the Youth Risk Behavior Surveys that can distinguish between teens who primarily buy and those who primarily bum their cigarettes. We show the ways in which price and restrictions on smoking will impact the decision to buy or bum cigarettes, as well as the impact on the allocation of purchased cigarettes between those self-consumed and those lent to others. Key results indicate that as prices and restrictions increase, teenagers are less likely to be regular smokers who purchase cigarettes and are more likely to consume smaller quantities obtained via the lending market. The basic conclusions are that anti-smoking policies have significant effects on the quantity of cigarettes consumed by teens and that these policies can help reduce the number of teens that escalate from experimental to regular smoking.