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Is Smoking a Fiscal Good?


  • Shantanu Bagchi

    (Georgia Southern University)

  • James Feigenbaum

    (Utah State University)


Even though smokers incur higher health expenditures than nonsmokers of the same age, smokers have significantly higher mortality rates, so the expected lifetime health expenditure for a smoker is actually lower than for a nonsmoker. Because of this fact, some politicians and policy-makers have argued that society might actually be better off promoting smoking rather than discouraging it. We consider this argument in a general-equilibrium model where health expenditures are paid for by a single-payer health-care system financed by taxes. Because the percentage increase in the tax base is larger than the percentage increase in health-care expenditures, the elimination of smoking actually decreases the budget-balancing health-care tax rate. (Copyright: Elsevier)

Suggested Citation

  • Shantanu Bagchi & James Feigenbaum, 2014. "Is Smoking a Fiscal Good?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(1), pages 170-190, January.
  • Handle: RePEc:red:issued:11-207
    DOI: 10.1016/

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    References listed on IDEAS

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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Shantanu Bagchi, 2016. "Differential Mortality and the Progressivity of Social Security," Working Papers 2016-03, Towson University, Department of Economics, revised Aug 2016.
    2. Bagchi, Shantanu, 2015. "Labor supply and the optimality of Social Security," Journal of Economic Dynamics and Control, Elsevier, vol. 58(C), pages 167-185.
    3. Bagchi, Shantanu, 2016. "Is The Social Security Crisis Really As Bad As We Think?," Macroeconomic Dynamics, Cambridge University Press, vol. 20(03), pages 737-776, April.

    More about this item


    General equilibrium; Annuities; Bequests; Mortality risk; Overlapping generations; Smoking; Health expenditures; Single-payer health-care system; Social Security;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health


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