Duke 2008 | ASHE | Equity and Efficiency in Health and Healthcare

This paper will investigate the impact of cigarette excise taxes faced during pregnancy on subsequent birth outcomes. In particular, I will focus on outcomes including birth weight, low birth weight status, infant mortality and other indicators of health at birth in the context of two-way (location and time) fixed effects models. While the question is not new, I propose to examine the possible impact of taxes on birth outcomes in the context of historically-large tax increases. In particular, I will use data from the Natality Detail Files from the period 1995-2003, which encompass a period of large state excise tax increases. This level of variation is useful for two reasons. First, coupled with evidence that these recent historically-large increases were driven by state budgetary concerns rather than general sentiment towards smoking, they present an opportunity to better estimate the causal impact of higher cigarette taxes on birth outcomes. More directly, such variation should provide more credible evidence of the likely impacts of relatively large tax increases, such as those contemplated recently by the U.S. Congress, compared to studies that have had to rely on out-of-sample extrapolation of their findings. Second, given the steady decrease over time in the fraction of mothers who smoke during pregnancy, these historically-large increases provide an opportunity to examine whether those mothers who persist in smoke during pregnancy are at all responsive to public policy measures such as higher cigarette taxes. Finally, the data allow for some exploration of the pathways through which taxes might affect birth outcomes and also allow for an examination of possible distributional impacts.