An Empirical Analysis of Public Health Services Impacts on Cigarette Addiction in Arkansas and the USA

Economic models of addiction include myopic and rational addiction models. The rational addiction model of the Becker and Murphy (BM) (1988), which could explain both myopic and rational addiction models, accounts for the interdependencies among the past, current, and future consumptions. The rational addiction model was empirically studied at the tobacco consumption and the coffee consumption. In this project, I use the rational addiction theory to determine the impacts that public service has on the cigarette smoking in Arkansas and the USA. The time series data of cigarette consumptions and prices in Arkansas and the USA were collected with the data of tobacco settlement funds, unemployment since 1955 until 2005. A GLS regression of a modified BM function indicates that the public service in Arkansas could decrease cigarette consumption on per adult on average 0.53-0.69 packs since 2003 when the Arkansas tobacco settlement funds became stable, which accounts for 0.7-0.9% of the total tobacco consumption in Arkansas. The dollar value of the public service in AR was $5.6-6.9 million, which were 43-45% of Arkansas settlement funds used for the tobacco related services. The national wide impacts were much less than in the Arkansas with 5.8-7.3% of total USA settlement funds raised. The lower impacts of the public service in the USA results from the lower level usage of the settlement funds for the tobacco related programs. This paper suggests that the more the settlement funds are used for the tobacco related programs, the more decrease the tobacco consumptions.