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The Economic Impacts of the Tobacco Settlement

  • David M. Cutler
  • Jonathan Gruber
  • Raymond S. Hartman
  • M.B. Landrum, J. Newhouse
  • Meredith B. Rosenthal

Recent litigation against major tobacco companies culminated in a Master Settlement Agreement' (MSA) under which the participating companies agreed to compensate most states for Medicaid expenses. We outline the terms of the settlement and analyze whether it was a move toward economic efficiency using data from Massachusetts. Medicaid spending will fall, but only a modest amount ($0.1 billion). The efficiency issue turns mainly on the treatment of health benefits from reduced smoking induced by the settlement. We conclude that the settlement was a move towards economic efficiency.

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File URL: http://www.nber.org/papers/w7760.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7760.

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Date of creation: Jun 2000
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Publication status: published as Cutler, David M., Jonathan Gruber, Raymond S. Hartman, Mary Beth Landrum, Joseph P. Newhouse, and Meredith B. Rosenthal. "The Economic Impacts of the Tobacco Settlement." Journal of Policy Analysis and Management 21, 1 (Winter 2002): 1-19.
Handle: RePEc:nbr:nberwo:7760
Note: HC HE
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  12. DeCicca, Philip & Kenkel, Donald & Mathios, Alan, 2000. "Putting Out The Fires: Will Higher Taxes Reduce Youth Smoking?," Working Papers 00-3, University of Aarhus, Aarhus School of Business, Department of Economics.
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