Date of Award

6-2012

Document Type

Open Access

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

Younghwan Song

Language

English

Keywords

public health, cigarettes, taxes, data, behavioral risks

Abstract

Public health advocates justify cigarette taxes, claiming they discourage smoking, which results in a healthier population. However, the more pertinent issue with which health advocates should be concerned is that of smoker well‐being. In this paper, I investigate whether cigarette taxes make smokers relatively more satisfied than nonsmokers. Additionally, because poor smokers have a higher discount rate than wealthy smokers, and therefore, perceive the tax differently, I explore the effect that income, in conjunction with a cigarette tax increase, has on smokers’ life‐satisfaction. Using cross‐sectional and time‐series data from the 2005‐2010 Behavioral Risk Factor Surveillance System survey, this paper utilizes regression analysis to investigate the effect of cigarette tax on the happiness of smokers relative to nonsmokers and of poor smokers relative to wealthy smokers. Inflation‐adjusted tax data was collected from The Campaign for Tobacco Free Kids and state unemployment rates were collected from the Bureau of Labor Statistics. Inconsistent with the findings of Gruber and Mullainathan (2005), this paper finds that the satisfaction of smokers does not change relative to nonsmokers in response to cigarette taxes, implying that they do not act in a time‐inconsistent manner as was previously thought. In addition, this paper finds some evidence that the satisfaction of low‐income smokers increases relative to high‐income smokers in response to a cigarette tax. Policymakers should consider this result when enacting tax hikes.

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