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The U.S. Tobacco Buyout: A Partial and General Equilibrium Analysis

Author

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  • Schmitz, Andrew
  • Haynes, D.J.
  • Schmitz, Troy G.
  • Schmitz, Evan D.

Abstract

This article analyzes the impact of removing the U.S. tobacco program in both a partial and general welfare economics framework. In a partial-equilibrium framework, a consumer taxfunded quota buyout can result in producer gains, consumer losses, net losses resulting from higher prices, and deadweight losses. In a general-equilibrium framework, society can gain from the buyout resulting from considerable potential savings from reduced healthcare costs attributable to a reduction in smoking. Additionally, we present a model that addresses the addictive qualities of tobacco while considering the effects of the quota buyout. We also conclude that another possible effect of the buyout is an increase in worker productivity because employees who are able to quit smoking reduce the amount of smoking-related sick days taken.

Suggested Citation

  • Schmitz, Andrew & Haynes, D.J. & Schmitz, Troy G. & Schmitz, Evan D., 2013. "The U.S. Tobacco Buyout: A Partial and General Equilibrium Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45, pages 1-9, August.
    • Handle: RePEc:ags:joaaec:155414
    DOI: 10.22004/ag.econ.155414
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    References listed on IDEAS

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    1. Fulginiti, Lilyan & Perrin, Richard, 1993. "The Theory and Measurement of Producer Response under Quotas," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 97-106, February.
    2. Chan, Kitty Kay & Capehart, Thomas C., Jr., 2004. "Health Concerns or Price: Which Takes Credit for Declining Cigarette Consumption in the U.S.?," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 19(01), pages 1-4.
    3. Brown, A. Blake & Snell, William M. & Tiller, Kelly H., 1999. "The Changing Political Environment for Tobacco—Implications for Southern Tobacco Farmers, Rural Economies, Taxpayers, and Consumers," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 31(2), pages 291-308, August.
    4. David L. Weimer & Aidan R. Vining & Randall K. Thomas, 2009. "Cost–benefit analysis involving addictive goods: contingent valuation to estimate willingness‐to‐pay for smoking cessation," Health Economics, John Wiley & Sons, Ltd., vol. 18(2), pages 181-202, February.
    5. Brown, A. Blake & Snell, William M. & Tiller, Kelly, 1999. "The Changing Political Environment For Tobacco -- Implications For Southern Tobacco Farmers, Rural Economies, Taxpayers, And Consumers," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 31(2), pages 1-18, August.
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