Postprint version. Published in Contemporary Economics Policy, Volume 18, Issue 3, July 1, 2000, pages 326-333.
Copyright © 2000 Wiley-Blackwell. The definitive version is available at http://dx.doi.org/10.1111/j.1465-7287.2000.tb00029.x.
This article examines the effect of restrictive smoking laws on restaurants, bars, and taverns. Supporters of these laws often argue that they do not harm firms and may even raise profits. Opponents argue that owners cater to customer smoking preferences, and laws mandating specific policies will negatively impact profits. This article provides a framework for examining the distribution of effects that smoking laws exert on businesses, and demonstrates that changes in total sales or tax revenues do not provide a meaningful understanding of the economic implications because smoking laws exert different effects on different firms. The distribution of these effects is examined using data from a nationwide survey of 1,300 restaurant, bar, and tavern owners. While some subsets of firms are predicted to suffer revenue declines, bars are predicted to be more than twice as likely to experience losses as restaurants. An important implication is that the increasing level of governmental restrictions on smoking in the hospitality sector could gradually impact the types of service available to the public.