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  3. American Economic Journal: Economic Policy
  4. November 2022
  5. Optimal Regulation of E-cigarettes: Theory and Evidence

Optimal Regulation of E-cigarettes: Theory and Evidence

  • Hunt Allcott
  • Charlie Rafkin
American Economic Journal: Economic Policy
vol. 14, no. 4, November 2022
(pp. 1-50)
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Abstract

We model optimal e-cigarette regulation and estimate key parameters. Using tax changes and scanner data, we estimate relatively elastic demand. A demographic shift-share identification strategy suggests limited substitution between e-cigarettes and cigarettes. We field a new survey of public health experts who report that vaping is more harmful than previously believed. In our model's average Monte Carlo simulation, these results imply optimal e-cigarette taxes are higher than recent norms. However, e-cigarette subsidies may be optimal if vaping is a stronger substitute for smoking and is safer than our experts report, or if consumers overestimate the health harms from vaping.

Citation

Allcott, Hunt, and Charlie Rafkin. 2022. "Optimal Regulation of E-cigarettes: Theory and Evidence." American Economic Journal: Economic Policy, 14 (4): 1-50. DOI: 10.1257/pol.20200805

Additional Materials

JEL Classification

  • D12 Consumer Economics: Empirical Analysis
  • D18 Consumer Protection
  • D61 Allocative Efficiency; Cost-Benefit Analysis
  • H21 Taxation and Subsidies: Efficiency; Optimal Taxation
  • H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
  • I12 Health Behavior
  • I18 Health: Government Policy; Regulation; Public Health
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