The Economics of Smoking Bans
While the empirical literature on smoking bans is extensive, little theory has been developed. This paper examines the welfare impact of smoking bans in an economy where smokers’ utility is reduced by a workplace/public place ban. The government has two instruments - increasing the price through taxation, or limiting when the product can be consumed through a ban. Its ability to reduce smoking through taxation is limited by a black market where cigarettes are not taxed. We show that the quantity instrument (ban) is always welfareenhancing. The model has application to other addictive activities.
|Date of creation:||01 May 2010|
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University of Chicago - George G. Stigler Center for Study of Economy and State
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