The effect of cigarette taxes during pregnancy on educational outcomes of the next generation

Smoking during pregnancy is most common among women with a low socioeconomic status and is negatively associated with important infant health measures such as birth weight. Cigarette taxes decrease smoking amongst pregnant women, thereby leading to improved birth outcomes. In this paper we investigate whether increasing cigarette taxes can reduce the intergenerational transmis-sion of a low socioeconomic status by reducing smoking rates among pregnant women with low edu-cational attainment. In a first step, we exploit variation in cigarette taxes across U.S. states over time to show that increasing cigarette taxes leads to improvements in the health of newborns which are larger for babies of low educated mothers. In a second step, we look at subsequent educational suc-cess of 16-year-olds measured by grade retention and school enrollment in a large sample of adoles-cents. We find that increasing cigarette taxes improves the outcomes of children from a low socioeco-nomic background, but find no effects among children from a higher socioeconomic background. Our findings therefore suggest that cigarette taxes can be an effective policy instrument for mitigating the propagation of a low socioeconomic status from one generation to the next.