The Economics of Smoking

70 Pages Posted: 2 Apr 1999 Last revised: 5 Oct 2022

See all articles by Frank J. Chaloupka

Frank J. Chaloupka

University of Illinois at Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Kenneth E. Warner

University of Michigan at Ann Arbor - School of Public Health

Date Written: March 1999


While the tobacco industry is among the most substantial and successful economic enterprises, tobacco consumption kills more people than any other product. Economic analysis of tobacco product markets, particularly for cigarettes, has contributed considerable insight to debates about the industry's importance and appropriate public policy roles in grappling with health consequences of tobacco. The most significant example is the rapidly expanding and increasingly sophisticated body of research on the effects of price increases on cigarette consumption. Because excise tax is a component of price, the resultant literature has been prominent in legislative debates about taxation as a tool to discourage smoking, and has contributed theory and empirical evidence to the growing interest in modeling demand for addictive products. This chapter examines the research and several equity and efficiency concerns accompanying cigarette taxation debates. It includes economic analysis of other tobacco control policies, such as advertising restrictions, prominent in tobacco control debates. Research addressing the validity of tobacco-industry arguments that its contributions to employment, tax revenues, and trade balances are vital to economic health in states and nations is also considered, as it is the industry's principal weapon in the battle against policy measures to reduce tobacco consumption.

Suggested Citation

Chaloupka, Frank J. and Warner, Kenneth E., The Economics of Smoking (March 1999). NBER Working Paper No. w7047, Available at SSRN:

Frank J. Chaloupka (Contact Author)

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Kenneth E. Warner

University of Michigan at Ann Arbor - School of Public Health ( email )

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