TY  - JOUR
AU  - Arcidiacono,Peter
AU  - Sieg,Holger
AU  - Sloan,Frank
TI  - Living Rationally Under the Volcano? An Empirical Analysis of Heavy Drinking and Smoking
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8602
PY  - 2001
Y2  - November 2001
UR  - http://www.nber.org/papers/w8602
L1  - http://www.nber.org/papers/w8602.pdf
N1  - Author contact info:
Peter Arcidiacono
Department of Economics
201A Social Sciences Building
Duke University
Durham, NC 27708
Tel: 919/660-1816
Fax: 919/684-8974
E-Mail: psarcidi@econ.duke.edu

Holger Sieg
Department of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA 19104
Tel: 215 898 7194
Fax: 215-573-2057
E-Mail: holgers@econ.upenn.edu

Frank A. Sloan
Department of Economics
Social Sciences Rm 236
Duke University
Box 90097
Durham, NC 27708-1111
Tel: 919/613-9358
Fax: 919/684-6246
E-Mail: fsloan@duke.edu
AB  - 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 which differ by their degree of forward-looking behavior. We also study models which allow for heterogeneity in discounting, and thus test whether certain types of individuals are more likely to show forward-looking behavior than other types. Our empirical findings suggest that forward-looking models with an annual discount factor of approximately 0.78 fit the data the best. 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 and drinking for old individuals which are significantly larger than those found in the data on elderly men.
ER  -