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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 and limited substitution between e-cigarettes and combustible cigarettes. In sample surveys, historical smoking trends for high- and low-vaping demographics were unchanged after e-cigarettes were introduced; this demographic shift-share identification also suggests limited substitution. We field a new quantitative survey of public health experts, who report that vaping is more harmful than previously believed. In our model, the optimal e-cigarette tax is probably higher than the current norm, but Monte Carlo simulations highlight substantial uncertainty.

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
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