Tax harmonization and the reduction of European smoking rates

Amidst growing optimism that smoking in Europe can be greatly reduced by the year 2000, this paper simulates the possible impacts of European tax harmonization in the context of rising incomes. A range of price and income elasticities are chosen from econometric studies which use micro information. This is justified by the aggregation problems associated with studies in the smoking literature which use aggregate data. Using micro elasticities, the simulations reported in this paper show that the aims of fiscal harmonization are at variance with the aims of health promotion.