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Putting Out The Fires: Will Higher Taxes Reduce Youth Smoking?

  • DeCicca, Philip

    (Department of Policy Analysis & Management)

  • Kenkel, Donald

    ()

    (Department of Policy Analysis & Management)

  • Mathios, Alan

    ()

    (Department of Policy Analysis & Management)

This paper re-examines the empirical support for predictions that proposed cigarette tax or price increases will substantially reduce youth smoking. Part of the support for these predictions comes from evidence that higher taxes reduce aggregate tobacco sales and adult smoking rates. But taxes may have much different impacts on youth starting behavior than on adult quitting behavior. We use a panel microdata set, the National Education Longitudinal Survey of 1988 (NELS:88), that spans a period when many states increased taxes on cigarettes.We are able to study the impact of taxes and prices on smoking behavior during exactly the period in adolescence when most smokers start their habits. Cross-sectional models of 12th grade smoking based on the NELS:88 data yield estimated price elasticities ranging from -0.29 to -0.98,similar to previous studies. But when we exploit the longitudinal nature of the data our results suggest that cigarette taxes or prices are not important determinants of smoking initiation. We find weak or nonexistent tax and price effects in models of the onset of smoking between 8th and 12th grade, models of the onset into heavy smoking between 8th and 12th grade, and discrete time hazard models that include state fixed effects. Our estimates create doubt about the strength of the response of youth smoking to higher taxes or prices, and suggest that alternative policy approaches to preventing youth smoking deserve serious attention. We also provide a new perspective on the relationship between smoking and schooling. We find that students with better tests scores are less likely to smoke, and that eventual dropouts are already more likely to smoke in 8th grade. Possible explanations for these patterns include individual heterogeneity in: the rate of time preference; tastes for deviancy; parental investment in smoking prevention as an aspect of child quality; and optimal lifetime plans for health and education human capital investment.

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File URL: http://www.hha.dk/nat/WPER/00-3.pdf
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Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 00-3.

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Length: 46 pages
Date of creation: 01 Jan 2000
Date of revision:
Handle: RePEc:hhs:aareco:2000_003
Contact details of provider: Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Phone: +45 89 486396
Fax: +45 8615 5175
Web page: http://www.asb.dk/departments/nat.aspx

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  1. Kenkel, D.S., 1988. "Health Behavior, Health Knowledge, And Schooling," Papers 10-88-3, Pennsylvania State - Department of Economics.
  2. Stewart, Mark B, 1983. "On Least Squares Estimation When the Dependent Variable Is Grouped," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 737-53, October.
  3. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1994. "An Empirical Analysis of Cigarette Addiction," American Economic Review, American Economic Association, vol. 84(3), pages 396-418, June.
  4. Frank J. Chaloupka & Michael Grossman, 1996. "Price, Tobacco Control Policies and Youth Smoking," NBER Working Papers 5740, National Bureau of Economic Research, Inc.
  5. Douglas, Stratford, 1998. "The Duration of the Smoking Habit," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 49-64, January.
  6. 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.
  7. Frank J. Chaloupka, 1990. "Rational Addictive Behavior and Cigarette Smoking," NBER Working Papers 3268, National Bureau of Economic Research, Inc.
  8. Saba, Richard P, et al, 1995. "The Demand for Cigarette Smuggling," Economic Inquiry, Western Economic Association International, vol. 33(2), pages 189-202, April.
  9. Lewit, Eugene M & Coate, Douglas & Grossman, Michael, 1981. "The Effects of Government Regulation on Teenage Smoking," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 545-69, December.
  10. Keeler, Theodore E. & Hu, Teh-wei & Barnett, Paul G. & Manning, Willard G. & Sung, Hai-Yen, 1996. "Do cigarette producers price-discriminate by state? An empirical analysis of local cigarette pricing and taxation," Journal of Health Economics, Elsevier, vol. 15(4), pages 499-512, August.
  11. Phillip Farrell & Victor R. Fuchs, 1981. "Schooling and Health: The Cigarette Connection," NBER Working Papers 0768, National Bureau of Economic Research, Inc.
  12. 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.
  13. Gary S.Grossman Becker & Michael Murphy & Kevin M., 1991. "Rational Addiction and the Effect of Price on Consumption," University of Chicago - George G. Stigler Center for Study of Economy and State 68, Chicago - Center for Study of Economy and State.
  14. Hai-Yen Sung & Teh-Wei Hu & Theodore E. Keeler, 1994. "Cigarette Taxation And Demand: An Empirical Model," Contemporary Economic Policy, Western Economic Association International, vol. 12(3), pages 91-100, 07.
  15. 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.
  16. Barnett, Paul G. & Keeler, Theodore E. & Hu, Teh-wei, 1995. "Oligopoly structure and the incidence of cigarette excise taxes," Journal of Public Economics, Elsevier, vol. 57(3), pages 457-470, July.
  17. Frank J. Chaloupka & Rosalie Liccardo Pacula, 1998. "An Examination of Gender and Race Differences in Youth Smoking Responsiveness to Price and Tobacco Control Policies," NBER Working Papers 6541, National Bureau of Economic Research, Inc.
  18. John A. Tauras & Frank J. Chaloupka, 1999. "Price, Clean Indoor Air, and Cigarette Smoking: Evidence from the Longitudinal Data for Young Adults," NBER Working Papers 6937, National Bureau of Economic Research, Inc.
  19. Douglas, Stratford & Hariharan, Govind, 1994. "The hazard of starting smoking: Estimates from a split population duration model," Journal of Health Economics, Elsevier, vol. 13(2), pages 213-230, July.
  20. Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 97-114, March.
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