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Is smoking a fiscal good?
Institution:1. Georgia Southern University, Statesboro, GA 30460-8152, United States;2. Utah State University, Logan, UT 84322-3565, United States;1. School of Medicine and Public Health, and Centre for Translational Neuroscience and Mental Health, the University of Newcastle, University Drive, Callaghan, NSW, Australia;2. IMPACT SRC, School of Medicine, Deakin University, Geelong, VIC, Australia;3. Department of Psychiatry, University of Melbourne, Parkville, VIC, Australia;4. School of Psychology, University of Wollongong, Wollongong, NSW, Australia;5. Preventive Medicine, Northwestern University, Chicago, Illinois, USA;6. Priority Research Centre for Physical Activity and Nutrition, the University of Newcastle, Callaghan, NSW, Australia;7. National Drug and Alcohol Research Centre, University of New South Wales, Sydney, NSW, Australia;8. Hunter New England Mental Health, Newcastle, NSW, Australia;1. Department of Cancer Epidemiology and Prevention Research, CancerControl Alberta, Alberta Health Services, Calgary, Alberta, Canada;2. Department of Oncology, Cumming School of Medicine, University of Calgary, Calgary, Alberta, Canada;3. Department of Community Health Sciences, Cumming School of Medicine, University of Calgary, Calgary, Alberta, Canada;4. Department of Molecular Biology and Biochemistry, Cumming School of Medicine, University of Calgary, Calgary, Alberta, Canada;5. Department of Epidemiology and Biostatistics, University of California, San Francisco, CA, USA;6. Translational Laboratory, Tom Baker Cancer Center, CancerControl Alberta, Alberta Health Services, Calgary, Alberta, Canada;7. Faculty of Kinesiology, Sport, and Recreation, University of Alberta, Edmonton, Alberta, Canada;1. Development Research Center of the State Council, Beijing 100010, China;2. Peking University, Beijing 100871, China;3. China Center for Public Finance, National School of Development, Peking University, Beijing 100871, China;4. Department of Economics, University of Nebraska, Omaha, NE 68182-0048, USA;1. University of Augsburg, Universitaetsstrasse 16, D-86316 Augsburg, Germany;2. University of Luxembourg, CREA, Faculty of Law, Economics and Finance, 162a, avenue de la Faïencerie L-1511 Luxembourg, Luxembourg;3. CESifo, Munich, Germany
Abstract:Even though smokers incur higher health expenditures than nonsmokers of the same age, smokers have significantly higher mortality rates, so the expected lifetime health expenditure for a smoker is actually lower than for a nonsmoker. Because of this fact, some politicians and policy-makers have argued that society might actually be better off promoting smoking rather than discouraging it. We consider this argument in a general-equilibrium model where health expenditures are paid for by a single-payer health-care system financed by taxes. Because the percentage increase in the tax base is larger than the percentage increase in health-care expenditures, the elimination of smoking actually decreases the budget-balancing health-care tax rate.
Keywords:General equilibrium  Annuities  Bequests  Mortality risk  Overlapping generations  Smoking  Health expenditures  Single-payer health-care system  Social Security
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