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Abstract

This paper shows the importance of the double-hurdle approach for modelling individuals' cigarette consumption, using data from the UK General Household Survey, and argues that participation and consumption should be treated as separate individual choices. The likelihood function for the full double-hurdle is derived, and it is shown how restrictions on the stochastic specification of the model and auxillary information, which identifies ex-smokers, allow it to be decomposed. The empirical results highlight the value of the sample separation information and the need to model starting and quitting as separate decisions.