Finally a Smoking Gun? Compensating Differentials and the Introduction of Smoking Bans

Abstract

Using the staggered introduction of smoking bans in the German hospitality industry over 2007–2008, I find a robust 2.4 percent decline in the daily earnings of workers in bars and restaurants associated with the most comprehensive smoking ban. This effect is unlikely to be driven by a decline in hospitality revenues or hours worked but is consistent with a simple model of compensating differentials. (JEL I12, I18, J22, J31, J81, L83)