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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. 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.
  2. 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.
  3. William N. Evans & Matthew C. Farrelly & Edward Montgomery, 1996. "Do Workplace Smoking Bans Reduce Smoking?," NBER Working Papers 5567, National Bureau of Economic Research, Inc.
  4. Ciliberto Federico & Kuminoff Nicolai V, 2010. "Public Policy and Market Competition: How the Master Settlement Agreement Changed the Cigarette Industry," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-46, July.
  5. Bellou, Andriana & Bhatt, Rachana, 2013. "Reducing underage alcohol and tobacco use: Evidence from the introduction of vertical identification cards," Journal of Health Economics, Elsevier, vol. 32(2), pages 353-366.
  6. Adda, Jérôme & Cornaglia, Francesca, 2005. "Taxes, Cigarette Consumption and Smoking Intensity," IZA Discussion Papers 1849, Institute for the Study of Labor (IZA).
  7. Kevin Callison & Robert Kaestner, 2012. "Do Higher Tobacco Taxes Reduce Adult Smoking? New Evidence of the Effect of Recent Cigarette Tax Increases on Adult Smoking," NBER Working Papers 18326, National Bureau of Economic Research, Inc.
  8. Bonnet, Céline & Réquillart, Vincent, 2011. "Tax incidence with strategic firms on the soft drink market," TSE Working Papers 11-233, Toulouse School of Economics (TSE), revised Jul 2012.
  9. 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.
  10. Cebula, Richard, 2010. "A Preliminary Contemporary Panel Data Analysis of the Consumption Impact of Cigarette Taxation," MPRA Paper 49201, University Library of Munich, Germany.
  11. 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.

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