Taxes, Cigarette Consumption and Smoking Intensity

Jerome Adda and Francesca Cornaglia

No 1849, IZA Discussion Papers from Institute of Labor Economics (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: smoking; cigarettes; addiction; taxes (search for similar items in EconPapers)
JEL-codes: I1 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2005-11
New Economics Papers: this item is included in nep-hea
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Citations: View citations in EconPapers (20)

Published - published in: American Economic Review, 2006, 96 (4), 1013-1028

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Journal Article: Taxes, Cigarette Consumption, and Smoking Intensity (2006)
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