LIVING RATIONALLY UNDER THE VOLCANO? AN EMPIRICAL ANALYSIS OF HEAVY DRINKING AND SMOKING

Authors: Arcidiacono, Peter; Sieg, Holger; Sloan, Frank

Source: International Economic Review, Volume 48, Number 1, February 2007 , pp. 37-65(29)

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Abstract:

This study investigates whether models of forward-looking behavior explain the observed patterns of heavy drinking and smoking of men in late middle age in the Health and Retirement Study better than myopic models. We develop and estimate a sequence of nested models that differ by their degree of forward-looking behavior. Our empirical findings suggest that forward looking models fit the data better than myopic models. These models also dominate other behavioral models based on out-of-sample predictions using data of men aged 70 and over. Myopic models predict rates of smoking for old individuals, which are significantly larger than those found in the data on elderly men.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1468-2354.2007.00417.x

Affiliations: 1: Duke University, U.S.A.; Carnegie Mellon University and NBER, U.S.A.; Duke University and NBER, U.S.A.

Publication date: 2007-02-01