NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Did the 1998 Master Settlement Affect Prenatal Smoking?

Prenatal smoking remains a great public health concern. It is the most important modifiable risk factor associated with low birth weight, contributing to one in five low birth weight births, and is estimated to raise the odds of low birth weight by 20% to 230%, depending on smoking intensity. Each year, more than a half million babies in the U.S. are born to women who smoke during pregnancy.

In November 1998, the major tobacco companies and the attorneys general for forty-six states reached the $206 Billion Master Settlement Agreement (MSA), ending litigation over smoking-related costs incurred by states. To help finance the settlement, tobacco companies immediately increased cigarette prices by forty-five cents nationwide.

This dramatic price increase was predicted to lead to a particularly large decline in cigarette smoking among pregnant women, since previous research had found that their price sensitivity exceeds that of smokers in general. Thus the MSA was expected to yield significant public health benefits by reducing the incidence of low birth weight births.

In The Effect of The 1998 Master Settlement Agreement on Prenatal Smoking (NBER Working Paper 11176), Douglas Levy and Ellen Meara estimate the decrease in prenatal smoking resulting from the MSA. In their analysis, the authors use data from the National Vital Statistic System's Natality Detail Files for the 1996-2000 period, which provides them with a sample of nearly ten million births.

The authors' approach is to contrast the level of prenatal smoking before and after the MSA, allowing for a time trend in smoking behavior. Prior to the MSA, approximately 13% of pregnant women smoked and prenatal smoking was declining slowly at a rate of 0.01 percentage points per month. The authors estimate that the MSA resulted in an immediately 0.3 percentage point drop in prenatal smoking - a drop equivalent to that which would normally occur over two and a half years - and that prenatal smoking then continued to fall at the same slow rate as before. Interestingly, the drop in prenatal smoking was twice as large for pregnant teens as for pregnant women as a whole.

The authors also look at the effect of the MSA on the number of cigarettes smoked per day. Prior to the MSA, pregnant smokers consumed 11 cigarettes per day on average. The authors estimate that the MSA resulted in an immediate drop of 0.2 cigarettes per day and that the decline over time in cigarettes smoked per day accelerated after the MSA.

The drop in prenatal smoking estimated in this study is much less than what would have been expected based on the previous literature - in fact, it is less than half as large as the predicted effect based on the smallest estimates from previous studies

The authors suggest several possible explanations for this difference. First, pregnant women who are still smoking in 1998 may be particularly intransigent and less responsive to price than earlier populations. Second, earlier studies may have been biased if changes in state cigarette excise taxes coincided with unobserved changes in other factors that affect prenatal smoking, such as attitudes towards smoking, or if tax changes were enacted along with other tobacco control measures, such as restrictions on smoking in public places. Finally, earlier studies were largely based on small price changes and their results may not be applicable to this case of a very large price increase.

The authors note that one limitation of their study is that no control group was available because the post-MSA price increase was implemented nationwide. However, the time trend in prenatal smoking would have to have turned sharply upwards just as the MSA was enacted in order for the authors' estimates to be as large as those found in the earlier literature, which seems highly unlikely. Further, the effect of the price increase on prenatal smoking could be even smaller than what the authors estimate if there were other non-price factors changing at the same time, such as negative publicity about smoking.

The authors conclude "the sharp rise in cigarette prices following the MSA had little effect on smoking prevalence and intensity among most pregnant women, but the effect was slightly stronger among pregnant teens."


The authors gratefully acknowledge financial support from the Agency for Health Care Research and Quality (grant #T32-HS0005), the National Institute on Aging through the NBER (grant #T32-AG00186), and the Russell Sage Foundation.
 
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