Working Paper: NBER ID: w7760
Authors: david m cutler; jonathan gruber; raymond s hartman; mary beth landrum; joseph p newhouse; meredith b rosenthal
Abstract: Recent litigation against major tobacco companies culminated in a Master Settlement Agreement' (MSA) under which the participating companies agreed to compensate most states for Medicaid expenses. We outline the terms of the settlement and analyze whether it was a move toward economic efficiency using data from Massachusetts. Medicaid spending will fall, but only a modest amount ($0.1 billion). The efficiency issue turns mainly on the treatment of health benefits from reduced smoking induced by the settlement. We conclude that the settlement was a move towards economic efficiency.
Keywords: No keywords provided
JEL Codes: I1; K0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Master Settlement Agreement (MSA) (G34) | cigarette prices (P22) |
| cigarette prices (P22) | cigarette consumption (D12) |
| cigarette consumption (D12) | external costs (D62) |
| cigarette consumption (D12) | Medicaid spending (I18) |
| Master Settlement Agreement (MSA) (G34) | Medicaid spending (I18) |
| cigarette consumption (D12) | health benefits (I12) |
| Master Settlement Agreement (MSA) (G34) | health benefits (I12) |
| cigarette prices (P22) | demand (R22) |