Smoke and Mirrors

Taylor P. Stevenson and William Shughart
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Taylor P. Stevenson: Austin Peay State University

Public Finance Review, 2006, vol. 34, issue 6, 712-730

Abstract: The 1998 Master Settlement Agreement (MSA) resolved litigation between forty-six states and the major U.S. cigarette manufacturers. In total, the defendants agreed to pay more than $246 billion over twenty-five years to compensate the states for costs incurred in treating smoking-related diseases. This article explores the political and economic determinants of the monies to be distributed to the states under the MSA. Consistent with a damage model, the evidence suggests that the tobacco settlement payments are positively correlated with states' smoking-attributable health care expenditures. However, the authors also find that politics influenced the amounts individual states are scheduled to receive from the tobacco companies: the four states that did not participate in the MSA, big-government states, and those with greater numbers of medical professionals and health-related organizations will collect significantly larger sums over time than the damage model predicts.

Keywords: Master Settlement Agreement; smoking-attributable Medicaid expenditures; interest groups; damage model; political economy model (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:34:y:2006:i:6:p:712-730

DOI: 10.1177/1091142106291489

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