Estimating the Effect of Smoking on Birth Weight in a Dynamic Model when Fertility is a Choice

The negative effect of smoking during a pregnancy on a child's birth weight outcome has been a consistent finding in the economics literature on estimating birth weight production functions. An important result in the literature is that the negative effect of smoking on birth weight is generally robust to the introduction of unobserved heterogeneity in family-specific health endowments. All of the studies have assumed, however, that fertility itself is unrelated to either anticipated or realized birth weight outcomes that depend on such endowments. One purpose of this paper is to explore the impact of relaxing that assumption on the estimates of the smoking effect on birth weight. To that end, a dynamic model of fertility choice that explicitly incorporates the smoking decision, allowing for its addictive nature, and the birth weight technology, is constructed and empirically implemented using longitudinal data from the National Longitudinal Surveys 1979 youth cohort. In addition to obtaining estimates of the birth weight production function that account for fertility choice, the estimates of the model are used to perform counterfactual policy experiments, such as assessing the impact of an increase in cigarette taxes on birth weight outcomes. Our simulation results show that in the event of a 50% increase in the price of cigarettes about 8% of the pregnant women will realize a significant increase of 7.5 oz., on average, in their children's birth weight outcomes.