Does Risk Perception Endogenously Cause Smokers to Switch to Smoking Smuggled Cigarettes?

Risk perception is a crucial component in evaluating the rationality of smoking decisions, but there are few studies that have examined its effect on the smoking of smuggled cigarettes. The purpose of this article is to empirically investigate whether risk perceptions affect the smoking of smuggled cigarettes in Taiwan in the context of socio-economic status. Since risk perception may be endogenous with regard to smoking smuggled cigarettes, the endogenous switching model is utilised to evaluate the effect of risk perception in relation to the smoker’s being concerned with health risks and tobacco quality. Our empirical results indicate that smokers with higher degrees of risk perception are less likely to smoke smuggled cigarettes. In addition, the relevant characteristics of the socio-economic status of smokers, such as weekly cigarette expenditure, gender, age, and whether or not they reside in the southern region of Taiwan, are also statistically significant in terms of smoking smuggled cigarettes. Therefore, the public health authorities in Taiwan should actively broadcast information on the fatal consequences of smoking smuggled cigarettes, thereby enhancing the smoker’s risk perceptions in regard to smuggled cigarettes. JEL Classifications : I12, I18, D81, C25