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| Author: | Gruber, J. Köszegi, B. |
| Title: | Tax incidence when individuals are time-inconsistent: the case of cigarette excise taxes |
| Journal: | Journal of Public Economics
2004 : AUG, VOL. 88:9-10, p. 1959-1987 |
| Index terms: | Taxation Cigarette industry Smoking |
| Freeterms: | Excise tax Self-control function |
| Language: | eng |
| Abstract: | The authors argue that traditional quantity-based measures of incidence are only appropriate under a very restrictive "time-consistent" model of consumption of sin goods. A model that is much more consistent with existing evidence on smoking decisions is a time-inconsistent formulation where excise taxes pn cigrattes serve a self-control function that is valued by smokers who would like to quit but cannot. This self-control function benefits lower income groups more, since they have a significantly higher price sensitivity of smoking. Calibrations show that, as a result, cigarette taxes are much less regressive than previously assumed, and are even progressive for a wide varity of parameter values. |
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