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The U.S. Tobacco Buyout: A Partial and General Equilibrium Analysis

Andrew Schmitz, D.J. Haynes, Troy G. Schmitz and Evan D. Schmitz

Journal of Agricultural and Applied Economics, 2013, vol. 45, 9

Abstract: This article analyzes the impact of removing the U.S. tobacco program in both a partial and general welfare economics framework. In a partial-equilibrium framework, a consumer taxfunded quota buyout can result in producer gains, consumer losses, net losses resulting from higher prices, and deadweight losses. In a general-equilibrium framework, society can gain from the buyout resulting from considerable potential savings from reduced healthcare costs attributable to a reduction in smoking. Additionally, we present a model that addresses the addictive qualities of tobacco while considering the effects of the quota buyout. We also conclude that another possible effect of the buyout is an increase in worker productivity because employees who are able to quit smoking reduce the amount of smoking-related sick days taken.

Keywords: Environmental Economics and Policy; Health Economics and Policy; Labor and Human Capital (search for similar items in EconPapers)
Date: 2013
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DOI: 10.22004/ag.econ.155414

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