Do adolescents with emotional or behavioral problems respond to cigarette prices?

• Author: Tekin, Erdal

1. Introduction

   Cigarette smoking is the most preventable cause of morbidity and mortality (McGinnis and Foege 1993; Peto et al. 1994; Mokdad et al. 2004). Medical research has established a strong link between chronic cigarette use and lung cancer at least since the 1964 Surgeon General's Report on Smoking and Health. Lung cancer accounts for about 30% Of all cancer deaths, and about 85% of lung cancer deaths are attributable to tobacco use (U.S. Department of Health and Human Services 1989). Cigarette smoking is also one of the leading risk factors of cardiovascular disease, which is the leading cause of death in the United States at the turn of the 21st century. (1) Each year more than 400,000 Americans die from cigarette smoking, which indicates that 20% of all deaths are cigarette related (Centers for Disease Control and Prevention 2008). Youth smoking is particularly important in this context, as the epidemiological evidence indicates that individuals who avoid smoking in adolescence or in young adulthood are unlikely to ever become smokers. In developed countries about 80% of adult smokers started smoking in their teens, and across the world there is an emergent trend toward initiation of smoking at younger ages (World Bank 1999).

   Although adult smoking has been declining gradually in the United States since the 1970s, there has been an increase in youth smoking during the 1990s. According to the Monitoring the Future Survey (Johnson et al. 2004), smoking rates peaked in 1996 for 8th and 10th graders, where the rates were 21% and 30.4%, respectively. The smoking rate peaked in 1997 for high school seniors, when more than one in three high school seniors smoked. At these peak levels, the smoking rates were about 50% higher for 8th and 10th graders and about 30% higher for 12th graders in comparison to the corresponding rates that prevailed in 1991. Even though the smoking prevalence among high school students has declined since 1997, the newest information suggests that the rate of decrease in smoking prevalence has declined, and nearly 25% of high school seniors report current smoking (Johnston et al. 2004). Such persistence in smoking rates among adolescents is noteworthy because it pertains to a generation that has received the greatest amount of smoking prevention messages and prevention interventions of any cohorts in American history.

   In January 2000 the Department of Health and Human Services launched a comprehensive and nationwide health promotion agenda, known as Healthy People 2010, which serves as a guide for improving the health of the American population during the first decade of the 21st century. One of the target areas highlighted in Healthy People 2010 is tobacco use, with the goal of reducing the use of tobacco products among adolescents to 21% by 2010 (Centers for Disease Control and Prevention 2000). Because academic research has identified a negative relationship between cigarette prices and smoking (Lewit and Coate 1982; Chaloupka and Grossman 1996), raising cigarette prices through the enactment of higher cigarette excise taxes has received much attention among various tobacco control strategies. The evidence on the extent of responsiveness of teenagers and young adults to cigarette prices, however, is somewhat mixed. Lewit, Coate, and Grossman (1981) find that among youths between the ages of 12 and 17, an increase in cigarette prices has a fairly substantial negative impact on smoking, with an elasticity of -1.44. Although Chaloupka (1991) reports that young adults, ages 17 to 24, are relatively insensitive to price changes, Chaloupka and Wechsler (1997) estimate a statistically significant and substantially large price elasticity for cigarette demand among college students. DeCicca, Kenkel, and Mathios (2001) report that the price effect of smoking onset between the 8th grade and the 12th grade is not significantly different from zero. Gruber and Zinman (2001) conclude that the most effective policy determinant of youth smoking, particularly among older teens, is the price. Emery, White, and Pierce (2001) find that although established adolescent smokers are responsive to price changes, experimenters are not. (2)

   Adolescents constitute an important age group to analyze from a policy point of view because of the adverse health impacts over the life cycle of early initiation of smoking. This age group is also an important category to analyze in and of itself because of presumed differences in risky behavior in comparison to adults; although, recent research underscores their responsiveness to prices and incentives (Levitt 1998; Gruber and Zinman 2001; Mocan and Rees 2005; Visser, Harbaugh, and Mocan 2006).

   This article focuses on a particular segment of the adolescent population. Specifically, it investigates whether adolescents with mental and behavioral problems, such as depression or delinquency, respond to variations in cigarette prices. This is a question that also has important policy implications. Studies show that adolescents with mental health problems have much higher rates of smoking (McMahon 1999; Saffer and Dave 2005), and this is particularly true for depression, conduct disorder or delinquency, and attention deficit disorder. With estimates of lifetime prevalence of depression through adolescents as high as 20% (Rushton, Forcier, and Schectman 2002), and the strong evidence on co-morbidity among depression, delinquency, and substance use, it is important to develop an understanding of the efficacy of cigarette price variations for this particular population. If adolescents with mental health problems are not very responsive to cigarette prices, then policy makers ought to find other ways to reduce tobacco use among these adolescents, in addition to raising taxes. If, on the other hand, they are responsive to cigarette prices, raising prices through taxes and other supply reduction policies may be considered an effective policy option.

   There may be reasons for adolescents with emotional and behavioral problems to behave differently from adults and from other adolescents with no such problems. For example, the theory of rational addiction (Becket and Murphy 1988) postulates that individuals maximize utility over the life cycle by taking into account the implications of their current actions on future utility. Specifically, utility depends on the current consumption of the addictive good, nonaddictive good, and the stock of past addictive consumption. The rational addict understands that while his utility rises when he consumes more today, his long-run utility is lower because consumption of the addictive good increases the stock of past consumption, which has a negative marginal utility. In this context Becket and Murphy (1988) and Becker, Grossman, and Murphy (1991) show that price responsiveness is inversely related to time preference. Individuals with higher discount rates are expected to be more responsive to price in comparison with those who have low discount rates. One testable implication is that younger and less educated individuals are more price sensitive than others (Becker, Grossman, and Murphy 1991). In our context this means that higher price sensitivity of individuals with mental or behavioral problems is predicted if such individuals have higher discount rates. In addition, these individuals are expected to discount the future more heavily because future costs are lower for them as their expected future wages are lower. There exists research to indicate that individuals who engage in risky behaviors have higher discount rates (Kirby and Petty 2004; Chesson et al. 2006). Clinical psychology recognizes that a number of psychological disorders, including depression, co-occur with various addictions and risk-taking behaviors and that they involve some type of failure of "self-regulation" (Greenbaum, Foster-Johnson, and Petrila 1996; Baumeister and Vohs 2004). The question of whether people with emotional disorders have cognitive differences or whether they differ in their judgments of reality is a subject of research (Dunning and Story 1991; Claypoole at al. 2007; Eisner, Johnson, and Carver 2008).

   It should be noted that a rational addiction framework is not necessary for differential price responsiveness to emerge between individuals with and without emotional and behavioral problems. For example, Saffer and Dave (2005) show that in a static model where utility depends on the consumption of an addictive good, nonaddictive good, and mental illness, the price elasticity of the addictive good can be larger for mentally ill individuals. However, whether or not individuals with emotional or behavioral problems react differently to prices is an empirical question, which motivates us to analyze the potential differences in price elasticity between individuals with and without these problems, similar in spirit to the research that analyzes the potential differences between males and females in their responsiveness to cigarette prices (Cawley, Markowitz, and Tauras 2004).

   Only one economic study to date has examined the interaction between mental illness and demand for tobacco and other substances. Saffer and Dave (2005) used the National Comorbidity Survey with appended price data and estimated demand functions for individuals with any lifetime mental illness. They concluded that individuals with a history of mental illness are responsive to prices, and therefore, higher excise taxes are effective even within this population. This is an important study with interesting findings. However, some issues are unexplored. Saffer and Dave (2005) use a sample that includes individuals with ages ranging from 15 to 54. Theoretical and empirical research suggests that youths respond to prices and policies differently than adults (Lewit and Coate 1982; Chaloupka 1991). Therefore, a sample of 15-to-54-year-olds does not allow for a differentiation between...