Myopia, regrets, and risky behaviors
This paper examines how a government should intervene when agents make, for different reasons, choices that have long term detrimental effects on their survival prospects. We consider an economy where some agents make risky choices (here sin good consumption) out of myopia, and regret their choices later on, whereas other agents make, because of their impatience, the same risky choices, which they never regret. We argue that, in the first-best, a government should only interfere with behaviors that agents regret, but not with other behaviors. In the second-best, asymmetric information and redistributive concerns imply interference not only with myopic behaviors, but also with impatience-based behaviors. Finally, we introduce heterogeneity in individual productivity, and show that the optimal tax on the sin good depends on the size of the myopic group, on the reactivity of sin good consumption to tax changes, and on the extent to which sin good consumption is correlated with labor earnings.
(This abstract was borrowed from another version of this item.)
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 19 (2012)
Issue (Month): 2 (April)
|Contact details of provider:|| Web page: http://www.springer.com|
Postal:P.O. Box 86 04 46, 81631 Munich, Germany
Phone: +49 (0)89-9224-1281
Fax: +49 (0)89-907795-2281
Web page: http://www.iipf.org/index.htm
More information through EDIRC
|Order Information:||Web: http://www.springer.com/economics/public+finance/journal/10797/PS2|
References listed on IDEAS
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.:
- Donald S. Kenkel & Robert R. Reed III & Ping Wang, 2002. "Rational Addiction, Peer Externalities and Long Run Effects of Public Policy," NBER Working Papers 9249, National Bureau of Economic Research, Inc.
- Jenny Lye & Joe Hirschberg, 2004.
"Alcohol consumption, smoking and wages,"
Taylor & Francis Journals, vol. 36(16), pages 1807-1817.
- Eugene M. Lewit & Douglas Coate, 1981.
"The Potential for Using Excise Taxes to Reduce Smoking,"
NBER Working Papers
0764, National Bureau of Economic Research, Inc.
- Lewit, Eugene M. & Coate, Douglas, 1982. "The potential for using excise taxes to reduce smoking," Journal of Health Economics, Elsevier, vol. 1(2), pages 121-145, August.
- Grégory Ponthière, 2010.
"Unequal Longevities and Lifestyles Transmission,"
- Orphanides, Athanasios & Zervos, David, 1995.
"Rational Addiction with Learning and Regret,"
Journal of Political Economy,
University of Chicago Press, vol. 103(4), pages 739-58, August.
- Silke Anger & Michael Kvasnicka, 2010.
"Does smoking really harm your earnings so much? Biases in current estimates of the smoking wage penalty,"
Applied Economics Letters,
Taylor & Francis Journals, vol. 17(6), pages 561-564.
- Anger, Silke & Kvasnicka, Michael, 2010. "Does Smoking Really Harm Your Earnings so Much? Biases in Current Estimates of the Smoking Wage Penalty," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 561-564.
- Lyon, Andrew B & Schwab, Robert M, 1995.
"Consumption Taxes in a Life-Cycle Framework: Are Sin Taxes Regressive?,"
The Review of Economics and Statistics,
MIT Press, vol. 77(3), pages 389-406, August.
- Andrew B. Lyon & Robert M. Schwab, 1991. "Consumption Taxes in a Life-Cycle Framework: Are Sin Taxes Regressive?," NBER Working Papers 3932, National Bureau of Economic Research, Inc.
- Laibson, David I., 1997.
"Golden Eggs and Hyperbolic Discounting,"
4481499, Harvard University Department of Economics.
- Michel Grignon, 2007. "Using Cigarette Taxes When Smokers Are Heterogeneous: Evidence on Hyperbolic Preferences, Endogenous Preferences, Smoking, and Price Elasticity of Smoking in France," Centre for Health Economics and Policy Analysis Working Paper Series 2007-10, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
- van Ours, J.C., 2002.
"A Pint a Day Raises a Man's Pay; But Smoking Blows that Gain Away,"
2002-20, Tilburg University, Center for Economic Research.
- van Ours, Jan C, 2002. "A Pint a Day Raises a Man's Pay; But Smoking Blows that Gain Away," CEPR Discussion Papers 3308, C.E.P.R. Discussion Papers.
- van Ours, J.C., 2004. "A pint a day raises a man's pay, but smoking blows that gain away," Other publications TiSEM 1447748f-5e9e-4064-84f2-1, Tilburg University, School of Economics and Management.
- van Ours, Jan C., 2002. "A pint a day raises a man's pay; but smoking blows that gain away," IZA Discussion Papers 473, Institute for the Study of Labor (IZA).
- Cremer, Helmuth & De Donder, Philippe & Maldonado, Darío & Pestieau, Pierre, 2008.
"Taxing Sin Goods and Subsidizing Health Care,"
CEPR Discussion Papers
6777, C.E.P.R. Discussion Papers.
- CREMER, Helmuth & DE DONDER, Philippe & MALDONADO, Dario & PESTIEAU, Pierre, 2008. "Taxing sin goods and subsidizing health care," CORE Discussion Papers 2008031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Helmuth Cremer & Philippe De Donder & Darío Maldonado & Pierre Pestieau, 2008. "Taxing Sin Goods and Subsidizing Health Care," CESifo Working Paper Series 2297, CESifo Group Munich.
- Frank J. Chaloupka & Henry Wechsler, 1995.
"Price, Tobacco Control Policies and Smoking Among Young Adults,"
NBER Working Papers
5012, National Bureau of Economic Research, Inc.
- Chaloupka, Frank J. & Wechsler, Henry, 1997. "Price, tobacco control policies and smoking among young adults," Journal of Health Economics, Elsevier, vol. 16(3), pages 359-373, June.
- Henry Saffer & Dhaval Dave, 2006.
"Alcohol advertising and alcohol consumption by adolescents,"
John Wiley & Sons, Ltd., vol. 15(6), pages 617-637.
- Henry Saffer & Dhaval Dave, 2003. "Alcohol Advertising and Alcohol Consumption by Adolescents," NBER Working Papers 9676, National Bureau of Economic Research, Inc.
- Henry Saffer & Dhaval Dave, 2002.
"Alcohol consumption and alcohol advertising bans,"
Taylor & Francis Journals, vol. 34(11), pages 1325-1334.
- M. Christopher Auld, 2005. "Smoking, Drinking, and Income," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
- Haavio, Markus & Kotakorpi, Kaisa, 2011.
"The political economy of sin taxes,"
European Economic Review,
Elsevier, vol. 55(4), pages 575-594, May.
- Sijbren Cnossen, 2007. "Alcohol taxation and regulation in the European Union," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(6), pages 699-732, December.
- Phillip B. Levine & Tara A. Gustafson & Ann D. Velenchik, 1995. "More Bad News for Smokers? The Effects of Cigarette Smoking on Labor Market Outcomes," NBER Working Papers 5270, National Bureau of Economic Research, Inc.
- Jonathan Gruber & Botond Koszegi, 2000. "Is Addiction "Rational"? Theory and Evidence," NBER Working Papers 7507, National Bureau of Economic Research, Inc.
- Timothy K.M. Beatty & Erling Røed Larsen & Dag Einar Sommervoll, 2007.
"Driven to Drink. Sin Taxes Near a Border,"
507, Statistics Norway, Research Department.
- Saroja Selvanathan, 2006. "How similar are alcohol drinkers? International evidence," Applied Economics, Taylor & Francis Journals, vol. 38(12), pages 1353-1362.
- Suranovic, Steven M. & Goldfarb, Robert S. & Leonard, Thomas C., 1999. "An economic theory of cigarette addiction," Journal of Health Economics, Elsevier, vol. 18(1), pages 1-29, January.
- Ahmed Khwaja & Frank Sloan & Yang Wang, 2009. "Do Smokers Value Their Health and Longevity Less?," Journal of Law and Economics, University of Chicago Press, vol. 52(1), pages 171-196, 02.
- Phillip B. Levine & Tara A. Gustafson & Ann D. Velenchik, 1997. "More Bad News for Smokers? The Effects of Cigarette Smoking on Wages," ILR Review, Cornell University, ILR School, vol. 50(3), pages 493-509, April.
- Sandra L. Decker & Amy Ellen Schwartz, 2000. "Cigarettes and Alcohol: Substitutes or Complements?," NBER Working Papers 7535, National Bureau of Economic Research, Inc.
- Nils Braakmann, 2008. "The smoking wage penality in the United Kingdom: Regression and matching evidence from the British Household Survey Panel," Working Paper Series in Economics 96, University of Lüneburg, Institute of Economics.
- van Ours, Jan C., 2004. "A pint a day raises a man's pay; but smoking blows that gain away," Journal of Health Economics, Elsevier, vol. 23(5), pages 863-886, September.
- Frank J. Chaloupka, IV & Richard Peck & John A. Tauras & Xin Xu & Ayda Yurekli, 2010. "Cigarette Excise Taxation: The Impact of Tax Structure on Prices, Revenues, and Cigarette Smoking," NBER Working Papers 16287, National Bureau of Economic Research, Inc.
- 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.
- Heineck, Guido & Schwarze, Johannes, 2003. "Substance Use and Earnings: The Case of Smokers in Germany," IZA Discussion Papers 743, Institute for the Study of Labor (IZA).
When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:19:y:2012:i:2:p:288-317. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.