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AN ANALYSIS OF CONSUMPTION, EXTERNALITIES AND TAXATION OF E-CIGARETTES IN EUROPE

A large body of literature in the social sciences has provided evidence that many outcomes are strongly related to those of an individual’s parents. This has been shown in a variety of ways and for a variety of outcomes, that includes family income, individual earnings, social class, occupational status and education. Somewhat related, there is extensive evidence that early life conditions with reference to childhood health and general circumstances contribute to shape later life opportunities for a wide range of outcomes, such as education, health, labour market outcomes and social status (see Smith (2015) for a review). In this project, we focus on one aspect of the transmission from parents to children which contributes to define early life conditions in a significant way but which has received less attention by economists: the intergenerational transmission of nicotine within families through exposure to passive smoking. This aspect merits attention in the economic debate on at least two grounds. First, it has implications for social welfare and children’s welfare in particular. Exposure to passive smoking is immediately dangerous for children’s health and the exposure to passive smoking during childhood might lead to a future of nicotine addiction, with its associated health risks (Warner et al., 1995). A second ground for economic relevance is the fact that exposure to passive smoking among children is a clear example of an externality which is an important rationale for taxation of cigarettes and other tobacco products.To the best of our knowledge, only a few papers in the economics literature deal with passive smoking. Adda and Cornaglia (2006, 2010) use cotinine levels as a measure of passive smoking for a sample of US adults to explore the effect of tobacco taxes and smoking bans in public places. Frijters et al. (2011) use the Health Survey for England from 1997 to 2006 to document the main risk factors that determine children’s exposure to passive smoke measured through saliva cotinine and provides estimates of the effect of this exposure on child health. In this project we aim to contribute to this topic in two ways. First, we aim to quantify the scale of transmission of nicotine from parents to children using saliva cotinine (the major metabolite of nicotine) as an objective biomarker for both active and passive smoking. The key advantage of using this marker is that of having a measurement of smoking which is objective, and much less prone to the measurement errors often seen with self-reported smoking behaviour. In contrast to Frijters et al. (2011) who rely on self-reported smoking behaviour by parents, we use cotinine to quantify both exposure to passive smoking and to measure objective nicotine consumption by parents. This is consistent with the idea of measuring the intergenerational transmission of nicotine and it allows us to estimate a Galtonian style regression of nicotine transmission which has the advantage of providing a measure of intergenerational correlation which is directly suitable for comparisons across time and space. Second, we aim to test whether the use of novel nicotine delivery products (i.e. e-cigarettes and other NDP) by parents reduces the nicotine transmission to children.We aim to deeply analyze the socio-economic charateristics of e-cig users and then estimate a Galtonian style regressions of nicotine transmission by matching parent-child data on cotinine and socio-economic variables from the Health Survey for England (HSE) spanning between 2000 to 2015. To assess the effect of NDP on nicotine transmission, we aim to employ several identification strategies, ie. a before-after analysis exploiting the spread in the use of e-cigs in England from the beginning of 2010 coincided with the first official pronunciation in favour of its use and an IV strategy using the medical advice to stop smoking received by parents as an instrument.