GF Smoking Analysis

GF Smoking Analysis Click to Enlarge

Mar 5, 2013 at 10:19 am

An economic analysis suggests recent smoking laws have not adversely impacted bars and restaurants in grand forks.  The study by UND's Department of Economics shows between 2002 and 2012 total sales at reastaurants grew on average five-point-six percent annually….bars four-point-eight percent.  The health department’s Theresa Knox says other factors contributed to the gains including the economy but banning cigarette smoke was not a negative.   The findings do not reule out that individual establishments were adversely or positively impacted by the laws as the data is the total amount by industry.


Executive Summary

Purpose and Methodology

In August of 2005, the state of North Dakota implemented legislation prohibiting smoking in most public workplaces, exempting bars, truck stops, and casinos. The perception by businesses at the time was that the legislation would reduce the sales by restaurants from the loss of customers who smoked and would now stay home. More recently, in August of 2010 the city of Grand Forks, North Dakota extended the legislation to prohibit smoking in these formerly exempted workplaces. Again the concern was that the change in legislation would negatively impact sales of these affected businesses.

The question of interest here is to determine what if any economic impact did the 2005 and 2010 smoke-free laws have on the sales of restaurants and bars located in the city of Grand Forks. Figure A displays quarterly restaurant sales between 2002 and 2012 (Q2). From the figure below one can see that restaurant sales have steadily increased over the period 2004 (Q2) through 2012.

By simply looking at this data series, one might be led to believe that the 2005 legislation, which was implemented in the third quarter, contributed to the subsequent increase of revenues by Grand Forks restaurants. In the year that followed implementation, revenues rose by 10%. Similarly, if we examine Figure B, which depicts alcohol sales by Grand Forks bars, one might conclude the 2010 smoke-free legislation that applied to bars led to lower sales. Sales declined by 4% from $12,526,100 to $12,039,946 in the year after bars became smoke-free.

These conclusions though fail to account for factors other than the changes in legislation, which may impact sales. Comparing Figures A and B one finds that sales by restaurants have trended upward for most of the period examined, whereas alcohol sales have followed a cycle of up and down periods over time. Peaks in the cycle of alcohol sales occurred in 2004 (Q4), 2008 (Q4), and 2011 (Q4).

In particular, our analysis of sales controls for the effects of annual and quarterly time trends, the impact of the overall Grand Forks’ macroeconomy, weather, the US-Canada exchange rate, and the autoregressive nature of the time series, when considering the effects of the legislation.

Jarrod Thomas

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