Optimal Regulation of E-Cigarettes: Theory and Evidence

108 Pages Posted: 5 May 2020 Last revised: 11 Apr 2021

See all articles by Hunt Allcott

Hunt Allcott

New York University (NYU)

Charlie Rafkin

Massachusetts Institute of Technology (MIT)

Date Written: April 2020

Abstract

There is an active debate about how to regulate electronic cigarettes, due to uncertainty about their health effects and whether they are primarily a quit aid or a gateway drug for combustible cigarettes. We model optimal e-cigarette regulation and estimate key parameters. Using tax changes and scanner data, we estimate relatively elastic demand and limited substitution between e-cigarettes and combustible cigarettes. In sample surveys, historical smoking trends for high- and low-vaping demographics were unchanged after e-cigarettes were introduced; this demographic shift-share identification also suggests limited substitution. We field a new quantitative survey of public health experts, who report that vaping is more harmful than previously believed. In our model, the optimal e-cigarette tax is probably higher than the current norm, but Monte Carlo simulations highlight substantial uncertainty.

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Suggested Citation

Allcott, Hunt and Rafkin, Charlie, Optimal Regulation of E-Cigarettes: Theory and Evidence (April 2020). NBER Working Paper No. w27000, Available at SSRN: https://ssrn.com/abstract=3592146

Hunt Allcott (Contact Author)

New York University (NYU) ( email )

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Charlie Rafkin

Massachusetts Institute of Technology (MIT) ( email )

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