Much Ado About Nothing? – Smoking Bans and Germany's PDF
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RUHR ECONOMIC PAPERS Michael Kvasnicka Harald Tauchmann Much Ado About Nothing? – Smoking Bans and Germany’s Hospitality Industry #172 Imprint Ruhr Economic Papers Published by Ruhr-Universität Bochum (RUB), Department of Economics Universitätsstr. 150, 44801 Bochum, Germany Technische Universität Dortmund, Department of Economic and Social Sciences Vogelpothsweg 87, 44227 Dortmund, Germany Universität Duisburg-Essen, Department of Economics Universitätsstr. 12, 45117 Essen, Germany Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI) Hohenzollernstr. 1-3, 45128 Essen, Germany Editors Prof. Dr. Thomas K. Bauer RUB, Department of Economics, Empirical Economics Phone: +49 (0) 234/3228341, e-mail: [email protected] Prof. Dr. Wolfgang Leininger Technische Universität Dortmund, Department of Economic and Social Sciences Economics – Microeconomics Phone: +49 (0) 231/755-3297, email: [email protected] Prof. Dr. Volker Clausen University of Duisburg-Essen, Department of Economics International Economics Phone: +49 (0) 201/183-3655, e-mail: [email protected] Prof. Dr. Christoph M. Schmidt RWI, Phone: +49 (0) 201/81 49-227, e-mail: [email protected] Editorial Offi ce Joachim Schmidt RWI, Phone: +49 (0) 201/81 49-292, e-mail: [email protected] Ruhr Economic Papers #172 Responsible Editor: Christoph M. Schmidt All rights reserved. Bochum, Dortmund, Duisburg, Essen, Germany, 2010 ISSN 1864-4872 (online) – ISBN 978-3-86788-192-0 The working papers published in the Series constitute work in progress circulated to stimulate discussion and critical comments. Views expressed represent exclusively the authors’ own opinions and do not necessarily refl ect those of the editors. Ruhr Economic Papers #172 Michael Kvasnicka and Harald Tauchmann Much Ado About Nothing? – Smoking Bans and Germany’s Hospitality Industry Bibliografi sche Informationen Rdeurh rD eEucotsncohmenic NPaatpioenrsa l#b1ib2l4iothek Die Deutsche Bibliothek verzeichnet diese Publikation in der deutschen National bibliografi e; detaillierte bibliografi sche Daten sind im Internet über: http//dnb.ddb.de abrufbar. ISSN 1864-4872 (online) ISBN 978-3-86788-192-0 Michael Kvasnicka and Harald Tauchmann1 Much Ado About Nothing? – Smoking Bans and Germany’s Hospitality Industry Abstract Over the last years, public smoking bans have been introduced in most European countries. Unlike elsewhere, in Germany such bans were introduced at state level at diff erent points in time, which provides important intra-country regional variation that can be exploited to identify the eff ects of such bans on the hospitality industry. Using monthly data from a compulsory survey carried out by the German Federal Statistical Offi ce, we study the short-run eff ects that these bans had on establish- ments’ sales. In contrast to the largely US-based literature, we fi nd that smoke-free policies had a negative (yet moderate) eff ect on establishment sales. Closure rates of businesses in the hospitality industry, however, were not signifi cantly aff ected by the introduction of state smoking bans. JEL Classifi cation: L51; I12 Keywords: smoking bans; sales; intra-country regional variation March 2010 1 Both RWI. – The authors are grateful to the German Federal Statistical Offi ce (Statistisches Bundesamt) for providing the data used in the empirical analysis and to Silke Anger, Thomas Bauer, and Christoph M. Schmidt for valuable comments. – All correspondence to Harald Tauch- mann, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Hohenzollernstr. 1-3, 45128 Essen, Germany, e-mail: [email protected]. 1 Introduction Tobaccoconsumptionrepresentsthesinglegreatestpreventablecauseofdeathin industrializedcountries(WorldHealthOrganization,2008). Inrecentyears, most countrieshaveenactedtobaccocontrolpoliciestoreducesmokingprevalenceand toprotectnon-smokersagainstsecond-hand-smoke.Amongthesecontrolpolicies, public smoking bans are widely considered the key measure for averting health damagecausedbysecond-hand-smoking. Yet,suchbansremainheavilydisputed, particularly in the hospitality industry, as owners of bars, pubs, and restaurants feartosuffersignificantlossesintheirsalesandrevenues. Knowledgeofthecostsofsmokingbanstobusinessesinthehospitalityindus- tryisimportantforpublicpolicy. Theydetermineinpartthepoliticalandpublic support that can be amassed for this tobacco control measure. And they are in- dispensableforanobjectiveassessmentoftheoverallneteconomiceffectsofthis instrument. Indeed, recentevidencesuggeststhatthecostsofsmokingbansmay bemoreimportantinsuchanassessmentthanlongthought,asthemainbenefitof smokingbans,thatisareductionintheoverallexposureofnon-smokerstopassive smoking,maybesignificantlysmallerthanhithertoassumed(AddaandCornaglia, 2006).1 Theeffectsofsmokingbansonbusinessesinthehospitalityindustryhavebeen studied extensively; see Goel and Nelson (2006) and in particular Scollo and Lal (2008)forthemostcomprehensiveliteraturereviewstodate. Moststudiesdonot findanyevidenceforanegativeeffectonbusinesses. However,previousresearch has focused on countries such as Australia (e.g. Wakefield et al., 2002; Lal et al., 1Exploitingdataonametaboliteofnicotine,AddaandCornaglia(2006)inacrossstateanalysis fortheUSprovideevidencethatpublicsmokingbanscanincreaseratherthandecreasetheexposure ofnon-smokerstotobaccosmokebydisplacingsmokerstoprivatelocalitieswheretheycontaminate non-smokers,inparticularchildren. 4 2004), Canada (e.g. Stanwick et al., 1988; Luk et al., 2006), and in particular the UnitedStates(e.g.CowlingandBond,2005;AdamsandCotti,2007),wheresmok- ingprevalence–andhencealsothelikelyeffectsonthehospitalityindustry–issig- nificantlylowerthaninmanyEuropeancountries;seethecountryprofilesprovided in(WorldHealthOrganization,2008)2. Yet, asofnow, thereisstilllittleevidence for European countries, which only recently enacted public smoking bans. Two notableexceptionsareAddaetal.(2007)3 andAhlfeldtandMaenning(2009). The latterstudyiscloselyrelatedtothepresentanalysis,asitalsofocusesonGermany andusessimilardatatoours.However,thescopeofthepresentpapergoesbeyond theworkofAhlfeldtandMaenning(2009),aswealsoconsidervariousexemptions tostatesmokingbans,theimportanceofpre-announceddelayedenforcementsof bans,aswellaspotentialeffectsnotjustonsalesbutalsoonbusinessopeningsand startups. Furthermore,inadequatedataandempiricalmethodsoftenlimittheexplanatory power of existing studies, as subjective (survey-based) rather than objective out- comemeasuresareused, pre-policydataisnotavailable, orchangesineconomic conditionsareinsufficientlycontrolledfor(seeScolloandLal,2008). Lastbutnot least,mostnon-USanalysesfocusontheeffectsofcountry-widesmokingbans,as mostcountrieshaveoptedforthistypeofban. Country-widebans,however,pro- videvariationingovernmentpolicyonlyacrosstime. Thismakesidentificationof causalitydifficult,astheeffectsofsuchcountry-widebanscaneffectivelyonlybe studied by a before-after type of comparison of outcome measures of interest. In such a setting, the risk of neglecting potentially confounding time trends is great (FleckandHanssen,2008),particularlyiftheperiodofanalysisspansseveralyears. 2PrevalencefiguresforCanadaaremissinginWorldHealthOrganization(2008). Yet, Health Canadareportsrathersmallprevalencerates;seewww.hc-sc.gc.ca. 3Estimatingtheshort-runeconomicimpactsoftheMarch2006Scottishsmokingbanonpublic houses,Addaetal.(2007)findthebantohavedecreasedsalesby10percentandcustomersby14 percent. 5 Inthispaper,weinvestigatewhetherstate-levelpublicsmokingbansenactedin GermanybetweenAugust2007andJuly20084 hadanydiscernableadverseeffect on sales in the hospitality industry.5 Following a nation-wide agreement in early 2007tobansmokingfrombars,pubs,restaurants,anddiscotheques,statesenacted state-specificregulationsatdifferentpointsintime(seeFigure1foratime-lineof thesixteenstatebans).Thisstate-levelvariationinthetimingofenactmentofsmok- ing bans allows us to disentangle genuine effects of tobacco control policies from potentialconfoundingtime-varyingfactorsthatmightaffectsalesinthehospitality industry. Inouranalysis,wealsoexploitthefactthatstate-levelsmokingbansvariednot onlyintheirdateofenactment,butalsointhepre-announceddatefromwhichany violationswouldbefined(enforcement)bystateauthorities(seeFigure1),andto somedegreealsointheirscopeandstrictness(e.g.permissionofseparatesmoking rooms in multiple-room establishments; exemptions for small single-room estab- lishments;exemptionsforsmokersclubs).6 Thedifferentialtreatmentofsmalland largeestablishmentsinstatesmokingbanregulationsledtoaconstitutionalcom- plaintofseveralownersofsingle-roomdiscothequesandbars,andarulingofthe FederalConstitutionalCourtonJuly30th2008thatsmokinginsingle-roombusi- 4AhlfeldtandMaenning(2009)wronglyclaimthatinJanuary2008smokingbanswereinopera- tioninallstatesanddroptheperiodafterthisdateinmajorpartsoftheirempiricalanalysis.Inthe stateofNorthRhine-Westphalia,forinstance,therelevantbill(‘GesetzzurVerbesserungdesNicht- raucherschutzesinNordrhein-Westfalen’)waspassedbythestateparliamentasearlyasDecember 19th2007. However,§7ofthebillexplicitlystatesthatinthehospitalityindustrysmokingbans comeintoforceonlyinJuly2008. Moreover,asdocumentedinFigure1,inRhineland-Palatinate, Saarland,Saxony,andThuringiastatesmokingbansalsowereintroducedlaterthanJanuary2008. 5PublicperceptioninGermanyatthetimeand–arguablynon-representative–opinionpolls amongGermaninnkeepers(CHDExpert,2008;KvasnickaandTauchmann,2010)stronglyconveyed theimpressionthatsmokingbanswereharmfultobusinesses. 6InallstatesexceptBavaria,statesmokingbanregulationsallowedbarsandrestaurantstoop- erateseparatesmokingrooms;intenofthesixteenGermanstates,statebansalsopermitteddance clubstooperatesuchsmokingrooms. InSaarland,astheonlystatetoconsidersuchexemptions, thestatesmokingban–undercertainconditions–didnotconcernsmallsingle-roompubs.Certain exemptionsweregrantedtoprivateclubsinseveralstates. Yet,onlyinBavariaandNorthRhine- Westphaliadidtherelabellingofordinarypubsto‘smokersclubs’developintoamajorloopholeof smokingbans. 6 Figure1:Timeschedulefortheintroductionofstatesmokingbans nessesistobeallowed7untilDecember31st2009,adeadlinebywhichstatesmust have revised their legislation. Since then, several states relaxed their regulations, mostnotablyBavaria,althoughitsstatesmokingbandidnotconflictwiththerul- ingofthefederalConstitutionalCourt. Thisrecentdevelopmentisnotaddressed in our empirical analysis, which is confined to the period from January 2007 to September2008and,hence,focusesonlyontheshort-runeffectsofthesmoke-free policiesthatwereinitiallyenactedbyGermany’ssixteenfederalstates. 7Thecourt’sdecisionwasdirectlyconcernedwiththesmoke-freelegislationofonlytwostates, i.e.Baden-WurttembergandBerlin. Yet,thecourtimplicitlypointedoutthatitsconcernswould analogouslyapplytothesmokingbansinanyotherstate,except–fordifferentreasons–Bavariaand Saarland. Forthelatter,statelegislationalreadyconsideredexemptionsforsmallestablishments. InBavariasmokingroomsweregenerallynotpermittedand, hence, single-roompubswerenot discriminated. Moreover,inthestateofRhineland-Palatinate,theStateConstitutionalCourtcame toa(provisional)decisionsimilartothelaterFederalConstitutionalCourt’soneasearlyasFebruary 2008.Thusinthisstate,smokingbansforsmallsingle-roomestablishmentscameneverintoforce. 7 Ourresultsshowthatstate-levelsmokingbansinGermanyhadanegativebut moderateeffectonsalesinthehospitalityindustry.Delayedenforcement(finingof violations)andexemptionforsingleroompubsinsomestatesprovedimmaterial forbusinesssales.Thisdoesnotholdfortheoptiontoopensmokersclubs.Instates thatdidallowforsuchclubs,noadverseeffectofsmokingbansonsalesisfound. Wealsofindnoevidencethatbusinessclosuresandstart-upswereaffectedbythe introductionofsmokingbans. Incontrasttothewidespreadpublicperceptionin Germanyatthetimeandnumerous–yetlargelynon-representative–opinionpolls amongGermaninnkeepers(CHDExpert,2008;KvasnickaandTauchmann,2010), our results hence suggest that smoking bans, at least in the short run, proved to beofonlymoderateharmtobusinesses. Nevertheless,andincontrasttothebulk of the (largely US-focused) literature in this area, we do find evidence of adverse effectsonbusinesses’sales. Theremainderofthispaperisorganizedasfollows. Thesubsequentsectionin- troducesthedata,section3discussestheempiricalapproach,andsection4presents theestimationresults.Section5summarizesourmainfindingsandconcludes. 2 The Data Our empirical analysis is based on data of year-to-year percentage changes8 in monthly sales at state level. This sales data – hitherto unpublished – was pro- videduponrequestbytheGermantheFederalStatisticalOffice(StatistischesBun- desamt).9 It covers the period January 2007 through September 2008 and hence × consists of 336 state-month observations (16 states 21 months). Information is 8Absolutesales(ine ornormalizedtoareferencedate)arealsoavailablebutjudgedasless comparableacrosstimebythedataprovider(FederalStatisticalOffice)becauseofstatedifferences inthesamplingdesignwithrespecttothehandlingofpanelmortalityandtheuseofrefreshment samples.Ourrateofchangedataaccountsforsuchdifferences. 9Dataprovisionisgratefullyacknowledged. 8
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