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

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 tax-funded quota buyout can result in producer gains, consumer losses, net losses resulting from higher prices, and deadweig...

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Bibliographic Details
Published in:Journal of agricultural and applied economics 2013-08, Vol.45 (3), p.411-419
Main Authors: Schmitz, Andrew, Haynes, D.J., Schmitz, Troy G., Schmitz, Evan D.
Format: Article
Language:English
Subjects:
Cigarette industry
Compensation
Competition
Consumers
Cost control
Equilibrium
Externality
Federal regulation
Health care expenditures
Invited Paper Sessions
Legislation
Marketing
Net losses
Prices
Public health
Quotas
Session Title: Accounting for Positive and Negative Externalities in Benefit-Cost Analyses
Smoking
Studies
Tobacco
Welfare economics
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Summary: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 tax-funded 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.
ISSN:1074-0708
2056-7405
DOI:10.1017/S1074070800004946