Time preference and perceptions about government spending and tax: Smokers’ dependence on government support

Yamamura, Eiji (2014): Time preference and perceptions about government spending and tax: Smokers’ dependence on government support.

Abstract

Previous studies show that smokers are likely to be more impatient and prefer immediate benefits compared with non-smokers. Thus, smokers are regarded as myopic people and therefore have a high time discount rate. Such a tendency is thought to be related not only to short-term benefits (as opposed to long-term benefits), but also free-riding behavior. Using individual data, this paper examines which types of government spending smokers with such characteristics prefer. The important findings are: (1) smokers consider the amount of government spending on social security and unemployment measures to be low and (2) smokers perceive their tax burden to be high. These findings imply that smokers tend to place greater importance on public expenditure that they will personally benefit from, but they are less willing to bear its cost. It is inferred from the estimation results that those who are myopic do not consider long-term benefits, which can result in a number of personal problems in the future, and they anticipate government expenditure will help them with such problems. That is, to enjoy the benefit of free riding, seemingly myopic people are more likely to prefer expenditure on social security and unemployment measures.

• Item Type: MPRA Paper
• Language: English
• Keywords: smoker; government spending; perceived tax burden; free rider.
• Subjects: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; H - Public Economics > H5 - National Government Expenditures and Related Policies > H51 - Government Expenditures and Health; H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions

References

Aidt, T.S., Dallal, B. (2008).Female voting power: the contribution of women’s suffrage to the growth of social spending in Western Europe (1869−1960). Public Choice, 134, 391−417.

Anderson, L. R., and Mellor, J. (2008). Predicting health behaviors with an experimental measure of risk preference. Journal of Health Economics 27, 1260−1274.

Barone, G and Mocetti, S (2011). Tax morale and public spending inefficiency. International Tax and Public Finance, 8 (6), 724−749.

Costa,D.L. and Kahn, M.E. (2013a). Energy Conservation “nudges” and environmentalist ideology: evidence from a randomized residential electricity field experiment. Journal of the European Economic Association 11(3), 680−702.

Costa,D.L. and Kahn, M.E. (2013b). Do liberal home owners consume less electricity? A test of the voluntary restraint hypothesis. Economics Letters 119(2), 210−212.

Cragg, M.I., Zhou, Y., Gurney, K., Kahn,M.E. (2013). Carbon geography: the political economy of congressional support for legislation intended to mitigate greenhouse gas production. Economic Inquiry 51(2), 1640−1650.

Creedy, J, Li, S and Moslehi, S. (2011). The composition of government expenditure: Economic Conditions and Preferences. Economic Inquiry, 49 (1), 94−107.

Cuccia, A. D., Carnes, A. G. (2001), A closer look at the relation between tax complexity and tax equity perceptions. Journal of Economic Psychology, 22, 113−140.

Daly, M., Delaney, L., and Harmon, C.P. (2009). Psychological and biological foundations of time preference. Journal of the European Economic Association 7(2–3),659–669.

Dastrup, S. R., Graff, Z .J., Costa, D. L. and Kahn, M. E. (2012). Understanding the solar home price premium: electricity generation and “green” social status. European Economic Review 56(5), 961−973.

Delaney, L., O'Toole, F. (2007). Decomposing demand for public expenditure in Ireland. Applied Economics Letters 14, 1091−1095.

Delaney, L., O'Toole, F. (2008a). Preferences for specific social welfare expenditures in Ireland. Applied Economics Letters 15, 985−989.

Delaney, L., O'Toole, F. (2008b). Individual, household and gender preferences for social transfers. Journal of Economic Psychology 29(3), 348−359.

Edlund, L.C., Pande, R. (2002).Why have women become left−wing? The political gender gap and the decline in marriage. Quarterly Journal of Economics, 117, 917−961.

Feld, L. P., Larsen, C. (2012). Self−perceptions, government policies and tax compliance in Germany, International Tax Public Finance, 19, 78−103.

Ferris, J. M. (1983). Demands for public spending: an attitudinal approach. Public Choice 40, 135−143.

Ferris, J. M. (1985).Interrelationships among Public Spending Preferences: A Micro Analysis. Public Choice 45, 139−153.

Funk, P., Gathmann, C. (2008). Gender gaps in policy making: Evidence from direct democracy in Switzerland. Economic Working Papers 1123, Department of Economics and Business, Universitat Pompeu Febra.

Gemmell, N., Morrissey, O. and Pinar, A. (2003). Tax perceptions and the demand for public expenditure: evidence from UK micro−data. European Journal of Political Economy 19(4), 793−816.

Greene, W. (2008). Econometric Analysis (6 eds). London. Prentice−Hall.

Harrison, G.,W., Lau, M.I., Williams, M.B (2010). Individual discount rates and smoking: Evidence from a field experiment in Denmark. Journal of Health Economics 29, 708−717.

Hatzinikolaou, D. (1997). Does government growth reduce precautionary saving? Applied Economics 29(4), 419−23.

Hatzinikolaou, D and Ahking, F. W. (1995). Government spending and consumer attitudes toward risk, time preference, and intertemporal substitution: An econometric analysis. Southern Economic Journal, 61(4), 1117−1126.

Hersch, J. (1996). Smoking, seat belts, and other risky consumer decisions: differences by gender and race. Managerial and Decision Economics, 471−481.

Hersch, J. and Viscussi, W.K. (1990).Cigarette smoking, seatbelt use, and differences in wage−risk tradoffs. Journal of Human Resource 202−227.

Hockley, G. C., and Harbour, G. (1983). Revealed Preferences　between Public Expenditures and Taxation Cuts:　Public Sector Choice. Journal of Public Economics 22, 387–399.

Ida, T., and Goto, R. (2009a). Simultaneous measurement of time and risk preferences: Stated preference discrete choice modeling analysis depending on smoking behavior. International Economic Review 50, 1169−1182.

Ida, T., and Goto, R. (2009b). Interdependency among addictive behaviours and time/risk preferences: discrete choice model analysis of smoking, drinking and gambling. Journal of Economic Psychology 30, 608−621.

Ikeda, S., Kang, M., and Ohtake, F. (2010). Hyperbolic discounting, the sign effect, and the body mass index. Journal of Health Economics 29, 268−284.

Ikeda, S. (2012). The Choice Causing Ruin (Japanese). (Jimetsu−suru Sentaku). Toyokizai Publishing: Tokyo.

Kang, Myong−Il, and Shinsuke Ikeda (2014), Time discounting and smoking behavior: Evidence from a panel survey. forthcoming in Health Economics.

Khwaja, A., Sloan, F. and Salm, M. (2006a). Evidence on preferences and subjective beliefs of risk takers: The case of smokers. International Journal of Industrial Organization 24, 667−682.

Khwaja, A., Sloan, F. and Chung, S. (2006b). Learning about individual risk and decision to smoke. International Journal of Industrial Organization 24, 683−699.

Khwaja, A., Sloan, F. and Chung, S. (2006c).The effects of spousal health on the decision to smoke: evidence on consumption externalities, altruism and learning within the household. Journal of Risk and Uncertainty, 32, 17−35.

Laibson, D. (1997). Golden eggs and hyperbolic discounting. Quarterly Journal of Economics 112, 443−477.

Laibson, D, Reppeto, A., and Tobacman, J. (2007). Estimating discount functions with consumption choices over lifecycle. NBER working paper series 13314.

Lott, L.R. and Kenny, L.W. (1999). Did Women’s suffrage change the size and scope of government? Journal of Political Economy, 107, 1163−1198.

Miller, G. (2008). Women’s suffrage, political responsiveness, and child survival in American history. Quarterly Journal of Economics, 123, 1287−1327.

Munasinghe, L. and Sicherman, N. (2006). Why do dancers smoke? Smoking, time preference, and wage dynamics. Eastern Economic Journal 32, 595−616.

Oh, H., Hong, J.H. (2012). Citizen’s trust in government and their willingness to pay. Economics Letters, 115, 345−347.

Preston, S.H., and Wang, H. (2006). Sex mortality differences in the United States: The role of cohorts smoking patterns. Demography 43, 631−646.

Sato, M., and Ohukusa, Y. (2003). The relationship between smoking initiation and time discount factor, risk aversion and information. Applied Economics Letters 10, 287−289.

Schokkaert, E. (1987). Preferences and demand for local public spending. Journal of Public Economics 34(2), 175−188.

Sorensen, R. J (2013). Does Aging Affect Preferences for Welfare Spending? A Study of Peoples' Spending Preferences in 22 Countries, 1985−2006. European Journal of Political Economy 29, 59−71.

Strauss, R., and Hughes, E. (1976). Estimation of models with jointly dependent variables: A simultaneous logit approach. Journal of Public Economics 34(2), 175−188.

Viscussi, W.K. and Hersch, J. (2001). Cigarette smoking as job risk takers. Review of Economics and Statistics, 269−280.

Yamamura,E. (2014a).　Trust in government and its effect on preferences for income redistribution and perceived tax burden.　Economics of Governance, 15(1), 71−100.

Yamamura,E.(2014b).　Smokers' sexual behavior and their satisfaction with family life.　 Forthcoming in Social Indicators Research.

Yamamura, E., and　Kondoh, H. (2013). Government transparency and expenditure in the rent−seeking industry: The case of Japan for 1998–2004. Contemporary Economic Policy 31(3), 635−647.