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Time Discounting and Smoking Behavior under Tax Hikes

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  • Myong-Il Kang
  • Shinsuke Ikeda

Abstract

By combining our broad panel survey of Japanese adults from 2005 to 2008 and actual cigarette tax data, we investigate how smoking behavior including responses to tax hikes depends on time discounting and its biases, such as hyperbolic discounting and the sign effect. Cigarette consumption displays significantly positive correlations with discount rates and the procrastinating tendency, and negative correlations with the sign effect. Hyperbolic, procrastinating, andnaïve respondents decrease their after-tax-hike cigarette consumption more than the others, implying that, irrespective of the preannouncement of a future tax hike, they postpone smoking moderation until the tax hike actually takes place. Finally, the government's revenue from cigarette tax peaks at a JPY 29.92 (around USD 0.28 using the conversion rate [107.16] in February 2008) higher tax per cigarette than the present actual level.

Suggested Citation

  • Myong-Il Kang & Shinsuke Ikeda, 2010. "Time Discounting and Smoking Behavior under Tax Hikes," ISER Discussion Paper 0782, Institute of Social and Economic Research, Osaka University.
  • Handle: RePEc:dpr:wpaper:0782
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    File URL: http://www.iser.osaka-u.ac.jp/library/dp/2010/DP0782.pdf
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    Cited by:

    1. Humphreys, Brad & Ruseski, Jane & Zhou, Li, 2015. "Physical Activity, Present Bias, and Habit Formation: Theory and Evidence from Longitudinal Data," Working Papers 2015-6, University of Alberta, Department of Economics.
    2. Robert Nuscheler & Kerstin Roeder, 2016. "To Vaccinate or to Procrastinate? That is the Prevention Question," Health Economics, John Wiley & Sons, Ltd., vol. 25(12), pages 1560-1581, December.
    3. Laurent Denant-Boemont & Enrico Diecidue & Olivier l’Haridon, 2017. "Patience and time consistency in collective decisions," Experimental Economics, Springer;Economic Science Association, vol. 20(1), pages 181-208, March.
    4. Philipp Huebler & Andreas Kucher, 2016. "Ashes to ashes, time to time - Parental time discounting and its role in the intergenerational transmission of smoking," Discussion Paper Series 326, Universitaet Augsburg, Institute for Economics.
    5. Takahiro Miura, 2016. "The association between time preference and smoking behavior: A dynamic panel analysis," Discussion Papers in Economics and Business 16-16, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    6. Hübler, Philipp, 2017. "Heritability of time preference: Evidence from German twin data," MPRA Paper 77620, University Library of Munich, Germany.
    7. Yamamura, Eiji, 2014. "Time preference and perceptions about government spending and tax: Smokers’ dependence on government support," MPRA Paper 55659, University Library of Munich, Germany.
    8. Philipp Huebler, 2017. "Heritability of time preference: Evidence from German twin data," Discussion Paper Series 334, Universitaet Augsburg, Institute for Economics.

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