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The Economic Impacts of the Tobacco Settlement

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

Abstract

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.

Suggested Citation

  • David M. Cutler & Jonathan Gruber & Raymond S. Hartman & M.B. Landrum & J. Newhouse & Meredith B. Rosenthal, 2000. "The Economic Impacts of the Tobacco Settlement," NBER Working Papers 7760, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7760
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    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • K0 - Law and Economics - - General

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