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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Becker, Gary S & Murphy, Kevin M, 1988.
"A Theory of Rational Addiction,"
Journal of Political Economy,
University of Chicago Press, vol. 96(4), pages 675-700, August.
- Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
- Andrew M. Jones, 2012.
The New Palgrave Dictionary of Economics,
- Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-44, September.
- Frank J. Chaloupka & Kenneth E. Warner, 1999.
"The Economics of Smoking,"
NBER Working Papers
7047, National Bureau of Economic Research, Inc.
- Adda, Jérôme & Cornaglia, Francesca, 2005.
"Taxes, Cigarette Consumption and Smoking Intensity,"
IZA Discussion Papers
1849, Institute for the Study of Labor (IZA).
- Jérôme Adda & Francesca Cornaglia, 2006. "Taxes, Cigarette Consumption, and Smoking Intensity," American Economic Review, American Economic Association, vol. 96(4), pages 1013-1028, September.
- M.C. Farrelly & C.T. Nimsch & A. Hyland & M. Cummings, 2004. "The effects of higher cigarette prices on tar and nicotine consumption in a cohort of adult smokers," Health Economics, John Wiley & Sons, Ltd., vol. 13(1), pages 49-58.
- Gruber, Jonathan & Koszegi, Botond, 2004. "Tax incidence when individuals are time-inconsistent: the case of cigarette excise taxes," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1959-1987, August.
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
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Geary Tech).
If references are entirely missing, you can add them using this form.