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Is Smoking a Fiscal Good?

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Author Info

  • Shantanu Bagchi

    (Georgia Southern University)

  • James Feigenbaum

    (Utah State University)

Abstract

Even though smokers incur higher health expenditures than nonsmokers of the same age, smokers have significantly higher mortality rates, so the expected lifetime health expenditure for a smoker is actually lower than for a nonsmoker. Because of this fact, some politicians and policy-makers have argued that society might actually be better off promoting smoking rather than discouraging it. We consider this argument in a general-equilibrium model where health expenditures are paid for by a single-payer health-care system financed by taxes. Because the percentage increase in the tax base is larger than the percentage increase in health-care expenditures, the elimination of smoking actually decreases the budget-balancing health-care tax rate. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2013.04.002
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 17 (2014)
Issue (Month): 1 (January)
Pages: 170-190

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Handle: RePEc:red:issued:11-207

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Related research

Keywords: General equilibrium; Annuities; Bequests; Mortality risk; Overlapping generations; Smoking; Health expenditures; Single-payer health-care system; Social Security;

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References

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Cited by:
  1. Emin Gahramanov & Xueli Tang, 2013. "Solving for the Retirement Age in a Continuous-time Model with Endogenous Labor Supply," Economics Series 2013_5, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.

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