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The U.S. Tobacco Buyout: A Partial and General EquilibriumAnalysis

Published online by Cambridge University Press:  26 January 2015

Andrew Schmitz ,
D.J. Haynes ,
Troy G. Schmitz  and
Evan D. Schmitz
Andrew Schmitz
Affiliation:
Department of Food and Resource Economics at the University of Florida, Gainesville, Florida
D.J. Haynes
Affiliation:
Department of Food and Resource Economics at the University of Florida, Gainesville, Florida
Troy G. Schmitz
Affiliation:
Morrison School of Agribusiness and Resource Management at Arizona State University, Mesa, Arizona
Evan D. Schmitz
Affiliation:
Richland, Washington
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Extract

This article analyzes the impact of removing the U.S. tobacco program inboth a partial and general welfare economics framework. In apartial-equilibrium framework, a consumer tax-funded quota buyout can resultin producer gains, consumer losses, net losses resulting from higher prices,and deadweight losses. In a general-equilibrium framework, society can gainfrom the buyout resulting from considerable potential savings from reducedhealthcare costs attributable to a reduction in smoking. Additionally, wepresent a model that addresses the addictive qualities of tobacco whileconsidering the effects of the quota buyout. We also conclude that anotherpossible effect of the buyout is an increase in worker productivity becauseemployees who are able to quit smoking reduce the amount of smoking-relatedsick days taken.

Keywords

addictiongeneral equilibriumhealthcare costsproduction quotastobaccowelfare economics110J20Q00QUQ18
Type
Invited Paper Sessions
Information
Journal of Agricultural and Applied Economics , Volume 45 , Issue 3 , August 2013 , pp. 411 - 419
Copyright
Copyright © Southern Agricultural Economics Association 2013

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