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Taxes, Cigarette Consumption and Smoking Intensity

Author

Listed:
  • Adda, Jérôme

    (Bocconi University)

  • Cornaglia, Francesca

    (Queen Mary, University of London)

Abstract

This paper analyses the compensatory behavior of smokers. Exploiting data on cotinine concentration – a metabolite of nicotine – measured in a large population of smokers over time, we show that smokers compensate tax hikes by extracting more nicotine per cigarette. Our study makes two important contributions. First, as smoking more intensively a given cigarette is detrimental to health, our results question the usefulness of tax increases. Second, we develop a model of rational addiction where agents can also adjust their intensity of smoking and we show that the previous empirical results suffer from severe estimation biases.

Suggested Citation

  • Adda, Jérôme & Cornaglia, Francesca, 2005. "Taxes, Cigarette Consumption and Smoking Intensity," IZA Discussion Papers 1849, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1849
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    JEL classification:

    • I1 - Health, Education, and Welfare - - Health

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