Threshold Effects in Cigarette Addiction: An Application of the Threshold Model in Dynamic Panels

Abstract

We adopt the threshold model of myopic cigarette addiction to US state-level panel data. The threshold model is used to identify the structural effects of cigarette demand determinants across the income stratification. Furthermore, we apply a bootstrap approach to correct for the small-sample bias that arises in the dynamic panel threshold model with fixed effects. Our empirical results indicate that there exists the heterogeneity of smoking dynamics across consumers.Cigarettes demand, price elasticity, threshold regression model, dynamic panel model, bias correction, bootstrap