The Effect of Tobacco Taxation and Health Warning Labels on Tobacco Consumption

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This research studies the effect of tobacco taxation and size regulation of health warning labels of tobacco packages on tobacco consumption. Studies such as Chaloupka (1999) state that tobacco taxation is the most effective policy, but economists such as Callison and Kaestner (2012) argue that the effect is small, and insignificant. This study intends to find the true effect of tobacco taxation and the size of health warning label on tobacco consumption and fill the gap. This research has been conducted for 15 OECD countries from 2006 to 2016. The dependent variable is “Tobacco Consumption” and the independent variable is “Tobacco Taxation”. The control variables are “Income”, “Unemployment”, “Income Inequality”, “Size of the Warning Label on Tobacco Packages”, and the interaction effect of tobacco taxation and warning label. The results show that the association between tobacco consumption and tobacco taxation is small and insignificant, but when it is mixed with larger health warning label on tobacco packages, the association is significant, negative and large. Fixed effect regression shows that the differences in taxes, warning label size, unemployment rate, and average income explain the differences in tobacco consumption across countries, but not within countries.
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