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

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Author Info
William N. Evans
Matthew C. Farrelly

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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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File URL: http://links.jstor.org/sici?sici=0741-6261%28199823%2929%3A3%3C578%3ATCBOST%3E2.0.CO%3B2-J&origin=repec
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Publisher 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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  1. Nuria Badenes-Plá & Andrew M. Jones, 2003. "Addictive goods and taxes: A survey from an economic perspective," Hacienda Pública Española, IEF, vol. 167(4), pages 123-153, December. [Downloadable!]
  2. Arzhenovskiy Sergey, 2005. "Socioeconomic determinants of smoking in contemporary Russia," EERC Working Paper Series 05-12e, EERC Research Network, Russia and CIS. [Downloadable!]
  3. Michael Moore & James Hughes, 2001. "The Health Care Consequences of Smoking and Its Regulation," Forum for Health Economics & Policy, Berkeley Electronic Press, vol. 4(1), pages 1022-1022. [Downloadable!] (restricted)
  4. John A. Tauras & Frank J. Chaloupka, 1999. "Price, Clean Indoor Air, and Cigarette Smoking: Evidence from the Longitudinal Data for Young Adults," NBER Working Papers 6937, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Stephen Farr & Carol Horton Tremblay & Victor Tremblay, 2001. "The Welfare Effect of Advertising Restrictions in the U.S. Cigarette Industry," Review of Industrial Organization, Springer, vol. 18(2), pages 147-160, March. [Downloadable!] (restricted)
  6. Ian Parry, 2003. "On the Costs of Excise Taxes and Income Taxes in the UK," Asia-Pacific Financial Markets, Springer, vol. 10(3), pages 281-304, May. [Downloadable!] (restricted)
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  7. Gabriel A. Picone & Frank Sloan & Justin G. Trogdon, 2004. "The effect of the tobacco settlement and smoking bans on alcohol consumption," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 1063-1080. [Downloadable!]
  8. Matthew C. Farrelly & Terry F. Pechacek & Frank J. Chaloupka, 2001. "The Impact of Tobacco Control Program Expenditures on Aggregate Cigarette Sales: 1981-1998," NBER Working Papers 8691, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Gabriel Picone & Frank Sloan, 2003. "Smoking Cessation and Lifestyle Changes," Forum for Health Economics & Policy, Berkeley Electronic Press, vol. 6(1), pages 1048-1048. [Downloadable!] (restricted)
  10. William N. Evans & Matthew C. Farrelly & Edward Montgomery, 1999. "Do Workplace Smoking Bans Reduce Smoking?," American Economic Review, American Economic Association, vol. 89(4), pages 728-747, September. [Downloadable!] (restricted)
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  11. Michael Grossman, 2004. "Individual Behaviors and Substance Use: The Role of Price," NBER Working Papers 10948, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Frank J. Chaloupka & Michael Grossman & John A. Tauras, 1996. "Public Policy and Youth Smokeless Tobacco Use," NBER Working Papers 5524, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Martin Forster & Andrew Jones, 2000. "The role of tobacco taxes in starting and quitting smoking: duration analysis of British data," Working Papers 176chedp, Centre for Health Economics, University of York. [Downloadable!]
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  14. Michael J. Moore & James W. Hughes, 2000. "The Health Care Consequences of Smoking and its Regulation," NBER Working Papers 7979, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Frank J. Chaloupka & Michael Grossman, 1996. "Price, Tobacco Control Policies and Youth Smoking," NBER Working Papers 5740, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Matthew C. Farrelly & Jeremy W. Bray & Gary A. Zarkin & Brett W. Wendling & Rosalie Liccardo Pacula, 1999. "The Effects of Prices and Policies on the Demand for Marijuana: Evidence from the National Household Surveys on Drug Abuse," NBER Working Papers 6940, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Martin Forster & Andrew M. Jones, . "The role of tobacco taxes in starting and quitting smoking," Discussion Papers 00/51, Department of Economics, University of York. [Downloadable!]
  18. Jérôme Adda & Francesca Cornaglia, 2006. "Taxes, Cigarette Consumption, and Smoking Intensity," American Economic Review, American Economic Association, vol. 96(4), pages 1013-1028, September. [Downloadable!]
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  19. Perry Singleton, 2008. "Public Sentiment and Tobacco Control Policy," Center for Policy Research Working Papers 106, Center for Policy Research, Maxwell School, Syracuse University. [Downloadable!]
  20. Ian Irvine, 2008. "Smoking Intensity, Compensatory Behavior and Tobacco Tax Policy," Working Papers 200818, Geary Institute, University College Dublin. [Downloadable!]
  21. William N. Evans & Helen Levy & Kosali I. Simon, 2000. "Data Watch: Research Data in Health Economics," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 203-216, Fall. [Downloadable!] (restricted)
  22. DeCicca, Philip & Kenkel, Donald & Mathios, Alan, 2000. "Putting Out The Fires: Will Higher Taxes Reduce Youth Smoking?," Working Papers 00-3, University of Aarhus, Aarhus School of Business, Department of Economics. [Downloadable!]
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  23. William N. Evans & Jeanne S. Ringel, 1997. "Can Higher Cigarette Taxes Improve Birth Outcomes?," NBER Working Papers 5998, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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