Are Smokers Rational Addicts? Evidence from Indonesia
Author Information
Author(s): Hidayat Budi, Thabrany Hasbullah
Primary Institution: University of Indonesia
Hypothesis
This study tests the rational addiction hypothesis of cigarette demand in Indonesia.
Conclusion
The study finds that Indonesian smokers are myopic addicts, meaning they do not consider future consequences when making smoking decisions.
Supporting Evidence
- Cigarette consumption is positively related to past consumption, indicating addiction.
- The short-run price elasticity for males is -0.38 and for females is -0.57.
- The long-run price elasticity for males is -0.4 and for females is -3.85.
Takeaway
The study shows that smokers in Indonesia often ignore the future risks of smoking, which means raising cigarette prices could help reduce smoking rates.
Methodology
The study used OLS, 2SLS, GMM, and System-GMM estimators to analyze data from the Indonesian Family Life Survey.
Potential Biases
Potential biases may arise from self-reported smoking behavior and economic factors not accounted for.
Limitations
The study's findings may not be generalizable beyond Indonesia due to cultural and economic differences.
Participant Demographics
The study focused on individuals aged 15 and above from various socio-economic backgrounds in Indonesia.
Statistical Information
P-Value
<0.01
Statistical Significance
p<0.01
Digital Object Identifier (DOI)
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