Smoking intensity, compensatory behavior and tobacco tax policy

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Title: Smoking intensity, compensatory behavior and tobacco tax policy
Authors: Irvine, Ian
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Date: 6-Aug-2008
Online since: 2010-04-20T16:24:32Z
Abstract: Smokers not only choose the number of cigarettes to smoke in any given period on the basis of price, they also choose the intensity with which to smoke - that is, how much nicotine to inhale. The possibility that quantity-reducing tax policies may be mitigated, or even completely offset, by higher intensity has been raised recently by Adda and Cornaglia (2006). The objective of this paper is to examine this possibility in the context of a utility-maximizing model of smoking that is based on known toxicological patterns. After calibrating this model to reflect observed behaviors, it is concluded that continuing smokers offset about one third of the quantity reducing impact of higher taxes. Compensatory behavior thus reduces tax effectiveness, but does not render it neutral. While toxicology has long recognized that nicotine inventory management is a key ingredient in smoking behaviour, this paper is the first to incorporate such knowledge into a utility-price based maximizing model.
Type of material: Working Paper
Publisher: University College Dublin. Geary Institute
Series/Report no.: UCD Geary Institute Discussion Paper Series; WP2008/18
Keywords: TobaccoNicotineCotinineIntensity
Subject LCSH: Tobacco--Taxation
Utility theory
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Language: en
Status of Item: Not peer reviewed
Appears in Collections:Geary Institute Working Papers

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