Economics of Smoking

Effects Of Smoking On Longevity And Health

The effect of smoking on health is well documented in the epidemiologic literature. Economists have made some contributions as well showing that smoking is very harmful to personal health. The authors review three types of economic studies here – effects of smoking on: the smoker’s health, nonsmoker’s health, and neonate’s health.

Between one third and three quarters of excess US veteran deaths are attributed to heart disease and lung cancer caused my military-subsized smoking. Smoking significantly contributes to inequality by income in predicted mortality.

A mother’s decision to smoke involves balancing the utility of smoking against the disutility of adversely affecting the health of her child. Agee and Crocker (2007) assumed that a mother has three arguments in her utility function – her consumption, her health, and her child’s health. Using data from the National Maternal and Infant Health Survey, they found that a mother values the health of her child more than her own health. The authors conclude that antismoking messages should mention health benefits to children from mothers not smoking.

Smoking is particularly harmful when done by pregnant women. The effect of smoking on birth weight is in the range of negative 100–150 g.

Compared to the 1950s when epidemiological studies on the health harms of smoking were just beginning to appear, people have become far more knowledgeable about the adverse effects of smoking. Thus, women who smoke during pregnancy in recent years are a much more select group than women who smoked while pregnant in the mid-twentieth century. Using data from three sources, the National Child Development Study, the British Cohort Study, and the Millennium Cohort Study, approximately half of the reported effects of smoking on the probability of low birth weight is due to unobserved maternal characteristics that are correlated with prenatal smoking.

Other Effects Of Smoking


Empirical evidence indicates that smokers have lower wages than nonsmokers. The issue is not whether or not there is a difference in wage rates by smoking status but rather whether or not the relationship from smoking to wages is causal. In particular, smoking may be systematically related to omitted factors that also affect worker productivity.

Expected lifetime contributions to Social Security are US$3800 lower for smokers than never smokers among men and approximately US$200 lower among women (US$2000). A study using Canadian General Social Survey data to determine the effect of smoking on wages found a loss in earnings due to daily smoking of 24%. One reason why Social Security contributions are lower for smokers is that they may have been out of the labor force for longer periods. For example, smoking affects labor market participation indirectly through its effect on diabetes (through its effect on blood sugar levels and insulin resistance) and cardiovascular disease onset.

Expenditures On Personal Health Care

Although smokers tend to be sicker on average, they also live shorter lives. The fewer years of exposure to health expenditures may offset higher expenditures smokers incur per year that they are alive. However, it is probably correct to conclude that, overall, smoking raises expenditures per smoker, though by a trivial amount. Approaches which evaluate smoking-related expenditures at a point in time rather than over lifetimes yield much higher estimates of smoking cost (Sloan et al., 2004).

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