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by Frank Chaloupka Kenneth E. Warner National
Bureau of Economic Research, Inc. While the tobacco industry
is among the most substantial and successful economic enterprises, tobacco
consumption kills more people than any other product. Economic analysis
of tobacco product markets, particularly for cigarettes, has contributed
considerable insight to debates about the industry's importance and appropriate
public policy roles in grappling with health consequences of tobacco.
The most significant example is the rapidly expanding and increasingly
sophisticated body of research on the effects of price increases on cigarette
consumption. Because excise tax is a component of price, the resultant
literature has been prominent in legislative debates about taxation as
a tool to discourage smoking, and has contributed theory and empirical
evidence to the growing interest in modeling demand for addictive products.
This chapter examines the research and several equity and efficiency concerns
accompanying cigarette taxation debates. It includes economic analysis
of other tobacco control policies, such as advertising restrictions, prominent
in tobacco control debates. Research addressing the validity of tobacco-industry
arguments that its contributions to employment, tax revenues, and trade
balances are vital to economic health in states and nations is also considered,
as it is the industry's principal weapon in the battle against policy
measures to reduce tobacco consumption.
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