Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/33513
Authors: 
Adda, Jérôme
Cornaglia, Francesca
Year of Publication: 
2005
Series/Report no.: 
IZA Discussion Papers 1849
Abstract: 
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 tax hikes by extracting more nicotine per cigarette. Our study makes two important contributions. First, as smoking more intensively a given cigarette 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 severe estimation biases.
Subjects: 
taxes
smoking
cigarettes
addiction
JEL: 
I1
Document Type: 
Working Paper

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