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Smoke and Mirrors

Author

Listed:
  • Taylor P. Stevenson

    (Austin Peay State University)

  • William F. Shughart II

    (University of Mississippi)

Abstract

The 1998 Master Settlement Agreement (MSA) resolved litigation between forty-six states and the major U.S. cigarette manufacturers. In total, the defendants agreed to pay more than $246 billion over twenty-five years to compensate the states for costs incurred in treating smoking-related diseases. This article explores the political and economic determinants of the monies to be distributed to the states under the MSA. Consistent with a damage model, the evidence suggests that the tobacco settlement payments are positively correlated with states' smoking-attributable health care expenditures. However, the authors also find that politics influenced the amounts individual states are scheduled to receive from the tobacco companies: the four states that did not participate in the MSA, big-government states, and those with greater numbers of medical professionals and health-related organizations will collect significantly larger sums over time than the damage model predicts.

Suggested Citation

  • Taylor P. Stevenson & William F. Shughart II, 2006. "Smoke and Mirrors," Public Finance Review, , vol. 34(6), pages 712-730, November.
    • Handle: RePEc:sae:pubfin:v:34:y:2006:i:6:p:712-730
    DOI: 10.1177/1091142106291489
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    References listed on IDEAS

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    Cited by:

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