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OCR Page 1 of 48MASSACHUSETTS
Tobacco-
Price
Jonathan Gruber
ASTITUTED OF RECHNOLOGY
MIT
Professor
50 Memorial Drive, E52-355
of Economics
Cambridge, MA 02142
January 20, 2000
Mr. Bruce N. Reed
Assistant to the President for Domestic Policy and
Director of the Domestic Policy Council
The White House
Washington, D.C. 20500
Dear Bruce,
I enclose for your perusal a paper that I have recently completed on the impact of cigarette
prices on youth smoking decisions ("Youth Smoking in the U.S.: Prices and Policies").
As you may recall, during the debates of Spring 1998 there was a lot of criticism of the existing
literature that suggested that youths were responsive to prices in their decision to smoke. This paper
revisits that question, trying to convincingly address the misgivings that some had with the previous
literature. I conclude that the price sensitivity for older teens (HS seniors) is almost exactly what we
used two years ago: an elasticity of -0.66. I also find, however, that younger teens (8-11th graders)
are not very price sensitive. So higher prices are unlikely to lower smoking much among younger teens,
but these youths will respond quite strongly by the time that they are seniors. I also do not find any
evidence that other policies such as clean air restrictions or youth access restrictions do much to lower
youth smoking.
I hope that this work is helpful to you as you move forward with tobacco policy. I'm happy to
talk further about this work or other tobacco related matters.
Sincerely,
Jonathan Gruber
Phone: (617) 253-8892
[email protected]
Fax: (617) 253-1330
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