Tobacco use, taxation, and self control in adolescence

Citation

Fletcher, Jason M.; Deb, Partha; & Sindelar, Jody L. (2009). Tobacco use, taxation, and self control in adolescence. National Bureau of Economic Research Working Paper Series. vol. No. 15130

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.

URL

http://www.nber.org/papers/w15130

Notes

Author contact info: Jason Fletcher University of Wisconsin-Madison La Follette School of Public Affairs 1225 Observatory Drive Madison, WI 53706 E-Mail: jfletcher@lafollette.wisc.edu Partha Deb Hunter College Department of Economics 695 Park Avenue Room 1524 West New York, NY 10065 Tel: 212/772-5435 Fax: 212/772-5398 E-Mail: partha.deb@hunter.cuny.edu Jody L. Sindelar Yale School of Public Health Yale University School of Medicine 60 College Street, P.O. Box 208034 New Haven, CT 06520-8034 Tel: 203/785-5287 Fax: 203/785-6287 E-Mail: jody.sindelar@yale.edu

Reference Type

Journal Article

Journal Title

National Bureau of Economic Research Working Paper Series

Author(s)

Fletcher, Jason M.
Deb, Partha
Sindelar, Jody L.

Year Published

2009

Volume Number

No. 15130

DOI

10.3386/w15130

Reference ID

7450