Tobacco Use, Taxation and Self Control in Adolescence

25 Pages Posted: 21 Jul 2009 Last revised: 3 Aug 2009

See all articles by Jason M. Fletcher

Jason M. Fletcher

University of Wisconsin - Madison - Robert M. La Follette School of Public Affairs; Yale University - School of Public Health

Partha Deb

City University of New York, CUNY Hunter College - Department of Economics

Jody L. Sindelar

Yale University - School of Public Health; National Bureau of Economic Research (NBER)

Date Written: July 2009

Abstract

Recent literature has suggested that higher taxes on addictive goods could increase welfare by assisting individuals with self control problems and trouble resisting 'temptation'. In contrast, if individuals continue to use despite increased prices, taxation may serve to reduce the welfare of these individuals while providing no benefits in managing self control nor mitigating externalities. We use data on adolescents from the National Longitudinal Study of Adolescent Health (Add Health) to examine the impact of tobacco taxes on smoking. To account for unobserved heterogeneity in response to taxes we estimate finite mixture models, positing two types of individuals with differential responses to taxes. We find evidence of differential price elasticity for tobacco use across the adolescents groups, and show that individuals with low self control or high discount rates are largely unresponsive to cigarette price. Those who have the least willpower may need the most help in quitting but are unresponsive to taxes, suggesting that policies other than taxation may be needed to reduce adolescent tobacco use.

Suggested Citation

Fletcher, Jason M. and Deb, Partha and Sindelar, Jody L., Tobacco Use, Taxation and Self Control in Adolescence (July 2009). NBER Working Paper No. w15130. Available at SSRN: https://ssrn.com/abstract=1434644

Jason M. Fletcher

University of Wisconsin - Madison - Robert M. La Follette School of Public Affairs ( email )

1180 Observatory Drive
Madison, WI 53706-1393
United States

Yale University - School of Public Health ( email )

PO Box 208034
60 College Street
New Haven, CT 06520-8034
United States

Partha Deb

City University of New York, CUNY Hunter College - Department of Economics ( email )

695 Park Avenue
New York, NY 10021
United States

Jody L. Sindelar (Contact Author)

Yale University - School of Public Health ( email )

PO Box 208034
60 College Street
New Haven, CT 06520-8034
United States
203-785-5287 (Phone)
203-785-6287 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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