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Smoking kills: An economic theory of addiction, health deficit accumulation, and longevity

Holger Strulik ()

No 316, Center for European, Governance and Economic Development Research Discussion Papers from University of Goettingen, Department of Economics

Abstract: In this paper I unify the economic theories of addiction and health deficit accumulation and develop a life cycle theory in which individuals take into account the fact that the consumption of addictive goods reduces their health and longevity. I distinguish two types of addiction: perfect and common. Individuals with perfect addiction perfectly control their addiction. Individuals with common addiction, though otherwise rational and forward looking, fail to fully understand how their addiction develops. I argue that the life cycle consumption pattern predicted for common addiction is more suitable for motivating empirically observable patterns of addictive goods consumption. I take the case of smoking as unhealthy behavior, calibrate the model with U.S. data, and apply it in order to investigate the life cycle patterns of smoking and quitting smoking and the socioeconomic gradients of unhealthy consumption and longevity.

Keywords: addiction; unhealthy behavior; health investments; aging; longevity (search for similar items in EconPapers)
JEL-codes: D11 D91 E21 I10 I12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-hea and nep-mac
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cegedp:316

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