Working Paper: NBER ID: w15422
Authors: W. Kip Viscusi; Joni Hersch
Abstract: The 1998 Master Settlement Agreement resolved the unprecedented litigation in which the states sought to recoup the cigarette-related Medicaid costs. The litigation was settled through a combination of negotiated regulatory requirements and financial payments of about $250 billion over 25 years. Settlement payments received by states are strongly related to smoking-related medical costs but are also related to political factors. The payments largely took the form of an excise tax equivalent, raising potential antitrust concerns. The regulatory restrictions imposed by the agreement also raised antitrust concerns. However, there has been no evident shift in industry concentration. The increase in advertising and marketing expenses has largely taken the form of price discounts. The settlement sidestepped the usual procedures pertaining to the imposition of taxes and the promulgation of new regulations.
Keywords: Tobacco Regulation; Master Settlement Agreement; Litigation; Public Health; Economic Impact
JEL Codes: H2; I18; K0; K13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| MSA (E16) | state revenues (H71) |
| MSA (E16) | cigarette prices (P22) |
| cigarette prices (P22) | smoking rates (I12) |
| MSA (E16) | smoking rates (I12) |
| MSA (E16) | regulatory restrictions (L51) |
| regulatory restrictions (L51) | smoking rates (I12) |