Impact of non-smoking ordinances on hospitality revenues: the case of Germany

Non-smoking ordinances are among the most popular albeit controversial public health-care legislations worldwide. This article provides an empirical assessment of the impact of non-smoking ordinances on bar and restaurant revenues in German Federal States. By application of a standard panel regression approach and a quasi-experimental research design, we find no compelling evidence for a significant impact of the introduction as well as the weakening of the legislation on revenues of bars and restaurants. Consumption pattern has either not changed at all or any reduction in spending by smokers is compensated for by a corresponding increase by non-smokers. These findings support the German – and similar – non-smoking legislations in the sense that positive externalities resulting from reduced health care cost are likely to outweigh the risk to businesses in the hospitality sector.