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The Health Care Consequences of Smoking and its Regulation

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  • Michael J. Moore
  • James W. Hughes
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    Abstract

    The literature on the health economics of smoking presents two principal facts: that smoking increases health care costs, and that restrictions on smoking lead to reductions in smoking prevalence and intensity. Some researchers have hypothesized that these two facts, in combination, allow the inference that restricting smoking will lower health care costs. For a variety of reasons, however, observed associations between smoking and health care use on the one hand, and regulations and smoking on the other, do not imply a casual effect of the restrictions on health care. This paper extends the literature by examining whether cigarette tax increases lead to lower health care costs. Using data from the 1991 and 1993 National Heath Interview Surveys, it first reproduces the principal results in the literature on smoking, taxes, and health care utilization, and then estimates the effects of tobacco taxes on health care. The results indicate that once one controls for endogenous quits, the health care benefits of smoking cessation are greater than previously believed. There is weak evidence that tax increases lead to higher cessation rates. In combination, these results suggest that, in addition providing a source for funding excess health care costs, tax increases may lower health care costs (for given longevity) directly by inducing smokers to quit.

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    File URL: http://www.nber.org/papers/w7979.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7979.

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    Date of creation: Oct 2000
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    Publication status: published as Moore, Michael J. and James W. Hughes. "The Health Care Consequences Of Smoking And Its Regulation," Forum for Health Economics and Policy, 2001, v4, Article 3.
    Handle: RePEc:nbr:nberwo:7979

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    1. Kenkel, D.S., 1988. "Health Behavior, Health Knowledge, And Schooling," Papers 10-88-3, Pennsylvania State - Department of Economics.
    2. Phillip Farrell & Victor R. Fuchs, 1981. "Schooling and Health: The Cigarette Connection," NBER Working Papers 0768, National Bureau of Economic Research, Inc.
    3. J.D. Angrist & Guido W. Imbens & D.B. Rubin, 1993. "Identification of Causal Effects Using Instrumental Variables," NBER Technical Working Papers 0136, National Bureau of Economic Research, Inc.
    4. William N. Evans & Jeanne S. Ringel, 1997. "Can Higher Cigarette Taxes Improve Birth Outcomes?," NBER Working Papers 5998, National Bureau of Economic Research, Inc.
    5. Gary S. Becker & Michael Grossman & Kevin M. Murphy, 1990. "An Empirical Analysis of Cigarette Addiction," NBER Working Papers 3322, National Bureau of Economic Research, Inc.
    6. Jeffrey E. Harris, 1994. "A Working Model for Predicting the Consumption and Revenue Impacts of Large Increases in the U.S. Federal Cigarette Excise Tax," NBER Working Papers 4803, National Bureau of Economic Research, Inc.
    7. Philip J. Cook & George Tauchen, 1982. "The Effect of Liquor Taxes on Heavy Drinking," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 379-390, Autumn.
    8. Michael J. Moore, 1995. "Death and Tobacco Taxes," NBER Working Papers 5153, National Bureau of Economic Research, Inc.
    9. Harris, Jeffrey E., 1982. "Increasing the federal excise tax on cigarettes," Journal of Health Economics, Elsevier, vol. 1(2), pages 117-120, August.
    10. Michael Grossman, 1990. "Health Benefits of Increases in Alcohol and Cigarette Taxes," NBER Working Papers 3082, National Bureau of Economic Research, Inc.
    11. Michael J. Moore, 1996. "Death and Tobacco Taxes," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 415-248, Summer.
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    Cited by:
    1. Grimard, Franque & Parent, Daniel, 2007. "Education and smoking: Were Vietnam war draft avoiders also more likely to avoid smoking?," Journal of Health Economics, Elsevier, vol. 26(5), pages 896-926, September.

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