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The Icelandic economic collapse, smoking, and the role of labor-market changes

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Abstract

Smoking is related to health deterioration through increased risk of various diseases. Changes in this health behavior could contribute to the documented health improvements during economic downturns. Furthermore, the reasons for changes in behavior are not well understood. We explore smoking behavior in Iceland before and after the sudden and unexpected economic crisis in 2008. Furthermore, to explore the mechanisms through which smoking could be affected we focus on the role of labor-market changes. Both real income and working hours fell significantly and economic theory suggests that such changes can affect health behaviors which in turn affect health. We use individual longitudinal data from 2007 to 2009, incidentally before and after the crisis hit. The data originates from a postal survey, collected by The Public Health Institute in Iceland. Two outcomes are explored: smoking participation and smoking intensity, using pooled ordinary least squares (OLS) and linear probability models. The detected reduction in both outcomes is not explained by the changes in labor-market variables. Other factors in the demand function for tobacco play a more important role. The most notable are real prices which increased in particular for imported goods because of the devaluation of the Icelandic currency as a result of the economic collapse.

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Acknowledgments

Financial support from the University of Iceland Research Fund, Edda Center of Excellence, and the Icelandic Research Fund (IRS, grant number 130611-051) is gratefully acknowledged. We express our gratitude to The Directorate of Health in Iceland (previously The Public Health Institute of Iceland) for provision of the data. We also thank Professors Michael Grossman and Gylfi Zoega for constructive comments.

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  1. Faculty of Economics, University of Iceland, Oddi v/Sturlugötu, 101, Reykjavík, Iceland

    Thorhildur Ólafsdóttir & Tinna Laufey Ásgeirsdóttir

  2. Department of Mathematics, Faculty of Physical Sciences, University of Iceland, Dunhagi 5, 107, Reykjavík, Iceland

    Birgir Hrafnkelsson

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  1. Thorhildur Ólafsdóttir
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Correspondence to Thorhildur Ólafsdóttir.

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Ólafsdóttir, T., Hrafnkelsson, B. & Ásgeirsdóttir, T.L. The Icelandic economic collapse, smoking, and the role of labor-market changes. Eur J Health Econ 16, 391–405 (2015). https://doi.org/10.1007/s10198-014-0580-x

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