STUDY: TOBACCO SETTLEMENT WILL CUT YOUTH SMOKING AND HURT PRODUCERS
The decision by manufacturers to raise the price of cigarettes last year will likely mean fewer young people will take up smoking and fewer farmers will grow tobacco in the future, according to a study by Virginia Tech agricultural economist Wayne D. Purcell. Cigarette manufacturers raised the price of a pack of cigarettes last November by 45 cents, to an average per-pack price of $2.40. That price increase, which is to finance the settlement of $206 billion reached between the industry and state attorneys general last year, could eventually result in a nine-percent reduction in overall domestic cigarette consumption, according to the study.
Purcell expects various consumer groups to respond to the 20-percent price increase differently. The largest part of the spectrum of cigarette buyers consists of older, habitual smokers, who will continue to smoke despite the higher costs.
But among younger people--both young smokers, who have less firmly established habits and less money available, and young people who haven't started smoking--the price increase will significantly dampen cigarette consumption. A previous study showed the sensitivity of the youth segment of the cigarette market to price changes was about three times that of the adult segment.
Purcell's study suggests that the 20-percent price increase will eventually result in a 26-percent consumption decline among young people.