American Economic Review: Vol. 96 No. 4 (September 2006)


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Taxes, Cigarette Consumption, and Smoking Intensity

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Adda, Jérôme, and Francesca Cornaglia. 2006. "Taxes, Cigarette Consumption, and Smoking Intensity." American Economic Review, 96(4): 1013-1028.

DOI: 10.1257/aer.96.4.1013


This paper analyses the compensatory behavior of smokers. Exploiting data on cotinine concentration—a metabolite of nicotine—measured in a large population of smokers over time, we show that smokers compensate for tax hikes by extracting more nicotine per cigarette. Our study makes two important contributions. First, as smoking a given cigarette more intensively is detrimental to health, our results question the usefulness of tax increases. Second, we develop a model of rational addiction where agents can also adjust their intensity of smoking, and we show that the previous empirical results suffer from estimation biases. (JEL D12, H25, I12)

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Adda, Jérôme
Cornaglia, Francesca

American Economic Review

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