PAM_4380_march_30_2011 - Taxation in Public Health...

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Taxation in Public Health 3/30/2011 Taxation Basic Issues and Analysis (Mon. 3/28) Efficiency: Taxes vs. External Costs (Today) Manning et al. “The Taxes of Sin” JAMA 1989 Economic Incidence of Alcohol Taxes (Friday) Kenkel “Are Alcohol Tax Hikes Fully Passed Through to Prices?” Amer Econ Rev 2005 Homework # 5 due Wednesday 4/6
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Background “For excise taxes to be at an economically efficient level, they must at least cover the costs to others that arise from smoking and heavy drinking.” Internalize the externality: graph on board Problem: Estimates of “cost of smoking, alcohol abuse” do not always distinguish between internal and external costs Internal costs : those costs borne by the smoker and taken into account in the utility max’n problem. External costs : those costs borne by others
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Old approach calculates COI = medical expenditures (direct costs) + lost productivity (indirect costs) Lost productivity = foregone earnings due to morbidity & mortality, usually lost years due to premature death dominate CDC estimate smoking costs U.S. $193 billion per year About $10 per pack MMWR 11/14/2008 NIAAA estimates alcohol abuse costs = $184.6 billion
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PAM_4380_march_30_2011 - Taxation in Public Health...

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