An Economic Model of Youth Smoking: Tax and Welfare Effects

Abstract

This paper presents a model of smoking choice in which rationality is bounded by limitations in intertemporal computational abilities. The model is applied to the youth decision to initiate smoking. Lifetime smoking paths of representative smokers indicate that youths may experience a reduction in lifetime utility and come to regret their decision to smoke. It is suggested that public policy interventions that raise the near term cost of smoking will be more effective in reducing lifetime smoking than informational campaigns that emphasize future health costs. However, youth taxes would have to be quite high to substantially reduce smoking rates among youths who have already begun to smoke. Also, low youth taxes would not prevent future smoking as an adult, although they would reduce smoking rates and lead to earlier quitting.Cigarettes, smoking, addiction, Behavioral economics