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Optimal Regulation of E-cigarettes: Theory and Evidence

Author

Listed:
  • Hunt Allcott
  • Charlie Rafkin

Abstract

We model optimal e-cigarette regulation and estimate key parameters. Using tax changes and scanner data, we estimate relatively elastic demand. A demographic shift-share identification strategy suggests limited substitution between e-cigarettes and cigarettes. We field a new survey of public health experts who report that vaping is more harmful than previously believed. In our model's average Monte Carlo simulation, these results imply optimal e-cigarette taxes are higher than recent norms. However, e-cigarette subsidies may be optimal if vaping is a stronger substitute for smoking and is safer than our experts report, or if consumers overestimate the health harms from vaping.

Suggested Citation

  • Hunt Allcott & Charlie Rafkin, 2022. "Optimal Regulation of E-cigarettes: Theory and Evidence," American Economic Journal: Economic Policy, American Economic Association, vol. 14(4), pages 1-50, November.
    • Handle: RePEc:aea:aejpol:v:14:y:2022:i:4:p:1-50
    DOI: 10.1257/pol.20200805
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    Citations

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    Cited by:

    1. Frank A. Sloan, 2024. "Subjective beliefs, health, and health behaviors," Journal of Risk and Uncertainty, Springer, vol. 69(2), pages 105-144, October.
    2. Henry Saffer & Selen Ozdogan & Michael Grossman & Daniel L. Dench & Dhaval M. Dave, 2024. "Comprehensive E-cigarette Flavor Bans and Tobacco Use among Youth and Adults," NBER Working Papers 32534, National Bureau of Economic Research, Inc.
    3. Cotti, Chad D. & Courtemanche, Charles J. & Liang, Yang & Maclean, Johanna Catherine & Nesson, Erik T. & Sabia, Joseph J., 2024. "The Effect of E-Cigarette Flavor Bans on Tobacco Use," Working Papers 114, Wake Forest University, Economics Department.
    4. Salvatore Barbaro & Nathalie Neu-Yanders, 2022. "Tobacco control and optimal taxation in a changing European market landscape," Working Papers 2204, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    5. Michael E. Darden, 2024. "Optimal e-cigarette policy when preferences and internalities are correlated," Journal of Risk and Uncertainty, Springer, vol. 68(2), pages 107-131, April.
    6. Michael F. Pesko, 2023. "Effects of e-cigarette minimum legal sales ages on youth tobacco use in the United States," Journal of Risk and Uncertainty, Springer, vol. 66(3), pages 261-277, June.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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