Much Ado About Nothing? – Smoking Bans and Germany's

26 Pages·2010·1.63 MB·English

RUHR
ECONOMIC PAPERS
Michael Kvasnicka
Harald Tauchmann
Much Ado About Nothing? –
Smoking Bans and Germany’s
Hospitality Industry
#172
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Ruhr Economic Papers
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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
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Ruhr Economic Papers #172
Michael Kvasnicka and Harald Tauchmann
Much Ado About Nothing? –
Smoking Bans and Germany’s
Hospitality Industry
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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