Taxes, Cigarette Consumption and Smoking Intensity

Jerome Adda () and Francesca Cornaglia ()

No 1849, IZA Discussion Papers from Institute for the Study of Labor (IZA)

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.

Keywords: taxes; smoking; cigarettes; addiction (search for similar items in EconPapers)
JEL-codes: I1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hea
Date: Written 2005-11
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Journal Article: Taxes, Cigarette Consumption, and Smoking Intensity (2006)
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