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The Economic Impacts of the Tobacco Settlement

29 Pages Posted: 18 Jul 2000  

David M. Cutler

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Raymond S. Hartman

Greylock McKinnon Associates

Mary Beth Landrum

Harvard Medical School

Joseph P. Newhouse

Harvard Medical School; Harvard Kennedy School (HKS); Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Meredith B. Rosenthal

Harvard University - T.H. Chan School of Public Health

Date Written: June 2000

Abstract

Recent litigation against major tobacco companies culminated in a Master Settlement Agreement' (MSA) under which the participating companies agreed to compensate most states for Medicaid expenses. We outline the terms of the settlement and analyze whether it was a move toward economic efficiency using data from Massachusetts. Medicaid spending will fall, but only a modest amount ($0.1 billion). The efficiency issue turns mainly on the treatment of health benefits from reduced smoking induced by the settlement. We conclude that the settlement was a move towards economic efficiency.

Suggested Citation

Cutler, David M. and Gruber, Jonathan and Hartman, Raymond S. and Landrum, Mary Beth and Newhouse, Joseph P. and Rosenthal, Meredith B., The Economic Impacts of the Tobacco Settlement (June 2000). NBER Working Paper No. w7760. Available at SSRN: https://ssrn.com/abstract=235716

David M. Cutler (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center, Room 315A
Cambridge, MA 02138
United States
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National Bureau of Economic Research (NBER) ( email )

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Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-355
Cambridge, MA 02142
United States
617-253-8892 (Phone)
617-253-1330 (Fax)

HOME PAGE: http://web.mit.edu/gruberj/www/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Raymond S. Hartman

Greylock McKinnon Associates ( email )

75 Park Plaza
4th Floor
Boston, MA 02116
United States

Mary Beth Landrum

Harvard Medical School ( email )

Department of Health Care Policy
Boston, MA 02115
United States

Joseph P. Newhouse

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard Medical School; Harvard Kennedy School (HKS) ( email )

Department of Health Care Policy
Boston, MA 02115
United States

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Meredith B. Rosenthal

Harvard University - T.H. Chan School of Public Health ( email )

677 Huntington Avenue
Boston, MA 02115
United States

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