Smoking Intensity, Compensatory Behavior and Tobacco Tax Policy
AbstractSmokers not only choose the number of cigarettes to smoke in any given period on the basis of price, they also choose the intensity with which to smoke - that is, how much nicotine to inhale. The possibility that quantity-reducing tax policies may be mitigated, or even completely offset, by higher intensity has been raised recently by Adda and Cornaglia (2006). The objective of this paper is to examine this possibility in the context of a utility-maximizing model of smoking that is based on known toxicological patterns. After calibrating this model to re?ect observed behaviors, it is concluded that continuing smokers o¤set about one third of the quantity-reducing impact of higher taxes. Compensatory behavior thus reduces tax e¤ectiveness, but does not render it neutral. While toxicology has long recognized that nicotine inventory management is a key ingredient in smoking behaviour, this paper is the ?rst to incorporate such knowledge into a utility-price based maximizing model.
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Bibliographic InfoPaper provided by Geary Institute, University College Dublin in its series Working Papers with number 200818.
Length: 28 pages
Date of creation: 06 Aug 2008
Date of revision:
tobacco; nicotine; cotinine; intensity;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- I12 - Health, Education, and Welfare - - Health - - - Health Production
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-21 (All new papers)
- NEP-HEA-2008-08-21 (Health Economics)
- NEP-PBE-2008-08-21 (Public Economics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- A snag with Increased taxes on cigarettes
by Kevin Denny in Geary Behaviour Centre on 2009-03-20 08:43:00
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