Optimal Regulation of E-cigarettes: Theory and Evidence

Hunt Allcott and Charlie Rafkin

No 27000, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: There is an active debate about how to regulate electronic cigarettes, due to uncertainty about their health effects and whether they are primarily a quit aid or a gateway drug for combustible cigarettes. We model optimal e-cigarette regulation and estimate key parameters. Using tax changes and scanner data, we estimate relatively elastic demand. A demographic shift-share identification strategy suggests limited substitution between e-cigarettes and cigarettes. We field a new survey of public health experts, who report that vaping is more harmful than previously believed. In our model’s average Monte Carlo simulation, these results imply that optimal e-cigarette taxes are higher than recent norms. However, e-cigarette subsidies may be optimal if vaping is a stronger substitute for smoking and is safer than our experts report, or if consumers overestimate the health harms from vaping.

JEL-codes: D12 D18 D61 H21 H23 I12 I18 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-hea, nep-ore and nep-pub
Note: EH LE PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as Hunt Allcott & Charlie Rafkin, 2022. "Optimal Regulation of E-cigarettes: Theory and Evidence," American Economic Journal: Economic Policy, vol 14(4), pages 1-50.

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