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The Compensating Behavior of Smokers: Taxes, Tar, and Nicotine

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  • William N. Evans
  • Matthew C. Farrelly

Abstract

Using data from the 1979 and 1987 National Health Interview Survey (NHIS), we test whether smokers alter their smoking habits in the face of higher taxes. Smokers in high-tax states are more likely to smoke cigarettes higher in tar and nicotine. Although taxes reduce the number of cigarettes consumed per day among remaining smokers, total daily tar and nicotine intake is unaffected. Young smokers, aged 18-24, are much more responsive to changes in taxes than are older smokers, and their total daily tar and nicotine intake actually increases after a tax hike. We illustrate that tax-induced compensating behavior may eliminate some health benefits generated by reduced smoking participation. A more appropriate tax might be based on the tar and nicotine content of cigarettes.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 29 (1998)
Issue (Month): 3 (Autumn)
Pages: 578-595

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Handle: RePEc:rje:randje:v:29:y:1998:i:autumn:p:578-595

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Cited by:
  1. Jérôme Adda & Francesca Cornaglia, 2006. "Taxes, Cigarette Consumption, and Smoking Intensity," American Economic Review, American Economic Association, vol. 96(4), pages 1013-1028, September.
  2. Bellou, Andriana & Bhatt, Rachana, 2012. "Reducing Underage Alcohol and Tobacco Use: Evidence from the Introduction of Vertical Identification Cards," IZA Discussion Papers 6951, Institute for the Study of Labor (IZA).
  3. Gabriel Picone & Frank Sloan, 2003. "Smoking Cessation and Lifestyle Changes," NBER Chapters, in: Frontiers in Health Policy Research, Volume 6, pages 115-142 National Bureau of Economic Research, Inc.
  4. Glenn C. Blomquist, 2003. "Self Protection and Averting Behavior, Values of Statistical Lives, and Benefit Cost Analysis of Environmental Policy," NCEE Working Paper Series 200302, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Mar 2003.
  5. Richard Cebula & Maggie Foley & Robert Houmes, 2014. "Empirical analysis of the impact of cigarette excise taxes on cigarette consumption: estimates from recent state-level data," Journal of Economics and Finance, Springer, vol. 38(1), pages 164-180, January.
  6. Matthew C. Farrelly & William N. Evans & Edward Montgomery, 1999. "Do Workplace Smoking Bans Reduce Smoking?," American Economic Review, American Economic Association, vol. 89(4), pages 728-747, September.
  7. Fletcher, Jason M. & Frisvold, David E. & Tefft, Nathan, 2010. "The effects of soft drink taxes on child and adolescent consumption and weight outcomes," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 967-974, December.
  8. Bonnet, Céline & Réquillart, Vincent, 2013. "Tax incidence with strategic firms in the soft drink market," Journal of Public Economics, Elsevier, vol. 106(C), pages 77-88.
  9. Cebula, Richard, 2010. "A Preliminary Contemporary Panel Data Analysis of the Consumption Impact of Cigarette Taxation," MPRA Paper 49201, University Library of Munich, Germany.
  10. Ciliberto, Federico & Kuminoff, Nicolai, 2010. "Public Policy and Market Competition: How the Master Settlement Agreement Changed the Cigarette Industry," MPRA Paper 24883, University Library of Munich, Germany.
  11. Kevin Callison & Robert Kaestner, 2014. "Do Higher Tobacco Taxes Reduce Adult Smoking? New Evidence Of The Effect Of Recent Cigarette Tax Increases On Adult Smoking," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 155-172, 01.

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