Postprint version. Published in Applied Economics, Volume 35, Issue 18, December 1, 2003, pages 1935-1942.
Although laws restricting smoking in restaurants are becoming commonplace, most research has focused on either the health benefits that laws may provide customers and workers or whether laws harm owners. But while smoking laws may directly alter profits, owners may alter prices, output, and other business attributes in ways that affect the welfare of customers and workers. This study examines whether restaurant and bar owners alter prices, entertainment, hours of operation and other business attributes in response to local smoking laws. Substantial support is found for these attribute changes in the Wisconsin hospitality industry. One implication is that an overall assessment of the desirability of smoking laws should consider economic effects imposed on owners, customers and workers, as well as health benefits that follow laws.