Saturday, December 10, 2011

Does Spending More on Tobacco Control Programs Make Economic Sense? An Incremental Benefit-Cost Analysis Using Panel Data
Abstract: This paper presents a benefit-cost analysis of the ongoing, state-level tobacco prevention and control programs in the United States. Using state-level panel data for the years 1991–2007, the study applies several variants of econometric modeling approaches to estimate the state-level tobacco demand. The paper finds a statistically significant evidence of a sustained and steadily increasing long-run impact of the tobacco control program spending on cigarette demand in states. The study also shows that, if individual states follow the Best Practices funding guidelines, potential future annual benefits of the tobacco control program can be as high as 14–20 times the cost of program implementation.
Unfortunately, says Chattopadhyay, funding for the programs has been declining steadily since about 2002. In 2010, states on average were spending 17 percent of the total investment recommended by the CDC for the programs. And in tough economic times, many states have turned to cigarette taxes to raise revenue.
After accounting for multiple factors, the researchers determined that tobacco control programs do reduce the demand for cigarettes. It's a trend that grows over time, in part because it takes smokers time to quit and because the programs become more efficient at delivering their services.
Unlike earlier studies, Chattopadhyay and Pieper even examined the effects of different state tobacco taxes, and how the differences might affect cigarette demand. Smokers in a state with a high tobacco tax could be more easily tempted to buy cigarettes if they share a border with a low-tax state, for instance. Tobacco taxes can range from less than 20 cents per pack in some states to nearly $5 in others.

by Sudip Cattopadhyay 1 and David R. Pieper 2
1. Department of Economics, San Francisco State University, 1600 Holloway Avenue, San Francisco, CA 94132. Phone +1 415 338 1447, Fax +1 415 338 1057, E-mail
2. Department of Geography, University of California, Berkeley, Berkeley, CA 94720. E-mail
Contemporary Economic Policy via Wiley Online Library Western Economic Association International
Early View (Online Version of Record published before inclusion in an issue); Article first published online: November 27, 2011

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