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CPB NewsletterRecent PublicationsDE CE MB E R 2008 - MA R C H 2009The following list provides an overview of recent CPB publicationsthat have appeared in English between December2008 and March 2009. All publications can be downloadedat www.cpb.nl. An English press release on thesepublications is sometimes available at the website.Special Publications76. Taxation and Regulation ofSmoking, Drinking and Gamblingin the European UnionSijbren Cnossen, David Forrestand Stephen Smith, February2009sijbren.cnossen@cpb.nlSee the article on page 4 of thisissue.CPB Documents177. Did the 2006 covenantsreduce school dropout in theNetherlands?Marc van der Steeg, Roel vanElk and Dinand Webbink,December 2008marc.van.der.steeg@cpb.nl179. Analyzing labour supplyof elderly people: A life-cycleapproachFrank van Erp and Paul de Hek,February 2009frank.van.erp@cpb.nlIn light of the ageing of the Dutchpopulation, policy measures aimat increasing the participationrate of elderly workers. This paperdevelops a stylized numericalsimulation model describingconsumption, savings and laboursupply behaviour over the life cycleto analyse the labour-marketimplications of such proposals.180. Relation entry, exit andproductivity: An overview ofrecent theoretical and empiricalliteratureMarch 2009henry.van.der.wiel@cpb.nl181. Competition, innovationand intellectual propertyrights in software marketsPaul de Bijl, Michiel Bijlsmaand Viktoria Kocsis, March2009viktoria.kocsis@cpb.nlThis study analyses underwhich circumstances it may bedesirable for the governmentto stimulate open source softwareas a response to marketfailures in software markets.182. The effect of early trackingon participation in highereducationRoel van Elk, Marc van derSteeg and Dinand Webbink,March 2009roel.van.elk@cpb.nlThis paper examines the impactof early tracking on enrolmentin and completion of highereducation. The estimates showthat early tracking has a detrimentaleffect on enrolment inand completion of higher education.CPB DiscussionPapers115. Rising health spending,new medical technology andthe Baumol effectMarc Pomp and Suncica Vujic,December 2008esther.mot@cpb.nlThis paper estimates the Baumoleffect in health spending,using a panel data set of OECDcountries.116. European natural gasmarkets: resource constraintsand market powerGijsbert Zwart, December2008gijsbert.zwart@cpb.nlIn this paper, the authors analyselong-run scenarios for theEuropean natural gas marketsin a model, NATGAS, that explicitlyincludes two factors, resourceconstraints and producers’market power.117. Understanding the Technologyof Computer TechnologyDiffusionLex Borghans and Bas ter Weel,January 2009bas.ter.weel@cpb.nl118. Pension Plans and the RetirementReplacement Ratesin the NetherlandsMark van Duijn, Maarten Lindeboom,Petter Lundborgand Mauro Mastrogiacomo,January 2009mauro.mastrogiacomo@cpb.nl119. Does employment affectproductivity?Albert van der Horst, HugoRojas-Romagosa and LeonBettendorf, February 2009albert.van.der.horst@cpb.nlThe authors investigate thetrade-off between employmentand labour productivityin a panel of OECDcountries in 1970-2003.120. The effects of competitionon the qualityof primary schools inthe NetherlandsJoelle Noailly, SuncicaVujic and Ali Aouragh,February 2009joelle.noailly@cpb.nl2009 March/April 2121. Modelling health care expenditures:Overview of theliterature and evidence froma panel time series modelRoel van Elk, Esther Mot andPhilip Hans Franses, February2009esther.mot@cpb.nlCPB Memoranda221. The credit crisis and theDutch economy 2009-2010March 2009mark.roscam.abbing@cpb.nlThis memorandum providesan extensive summary of CPB’sCentral Economic Plan 2009,including the chapter on thecauses and effects of the creditcrisis and projections for theDutch economy this year andnext.CPB Newsletter is a publicationof CPB Netherlands Bureaufor Economic Policy AnalysisP.O. Box 805102508 GM The HagueThe NetherlandsT +31 70 3383380F +31 70 3383350I www.cpb.nlE redactie@cpb.nlEditorial board:Kees FolmerAlbert van der HorstJasper de JongDick MorksJacqueline TimmerhuisPrint:Design:ColofonKoninklijke De SwartMaarten Balyongrafi sche vormgeving bvCPB Newsletter is also available at www.cpb.nlArticles can be copied without prior permission,stating CPB as source.
2009 March/April 3Smoking, drinking and gambling: regulation ismore important than excise-duty increasesTaxes play an important role in restraining excessivesmoking, drinking and gambling. But complementarypolicies in the form of direct regulation also have a meaningfulrole to play in finding the right balance betweenconsumer sovereignty and reduction of external costs.IntroductionSmoking is the single largest cause of avoidable death in the EuropeanUnion. One in ten of all 11-year olds have been drunk atleast twice. Electronic gaming machines are the crack cocaine ofgambling, while Internet gambling is virtually immune to regulation.Despite the negative aspects of the above-mentioned “vices”, theprinciple of consumer sovereignty implies that people should beallowed to follow their own pursuits (smoking, for example), aslong as they do not harm others. There is sound medical evidence,furthermore, that a drink each day keeps the doctor away. Recreationalgambling can be an enjoyable form of entertainment formany people. These and other salient facts form the backgroundfor a CPB study that analyses the taxation and regulation ofsmoking, drinking and gambling.Valuation of welfare gains and lossesIn any analysis of the effects and social costs of smoking, drinkingand gambling, the gains from a reduction in harmful consumptionshould be balanced against the welfare loss suffered by adultsmokers, moderate drinkers and leisure gamblers. In light of theconsumer sovereignty principle, the main issue is to restrain theconsumption carried out by young people who are insuffi cientlyinformed about the dire consequences of their behaviour or whodiscount the short-term effects of abusive consumption at a higherrate than the long-term effects.How far should smoking be curtailed?There is much uncertainty about the external costs of passivesmoking, which may be lower than is often thought, particularlyafter the introduction of bans on smoking in public places. Thesame applies to the net health costs: the healthcare costs thatare saved as a result of the early death of smokers (who do notincur the socially costly expense of old-age ailments) should bededucted from the gross costs caused by their behaviour.The correct application of the economic external cost principleshows that the excise yield of a pack of cigarettes is often higherthan the costs of smoking. This seems to provide an argumentfor holding back on general measures that would further curtailsmoking. On the other hand, the decision-making process ofsmokers is often non-rational: they later regret their earlier habitand in hindsight appreciate the restrictions placed on their behaviourby the government. This provides an argument for focusinganti-smoking policies on this group—mainly the young— amongother things through the excise duty instrument.How to restrain alcohol abuse?Alcohol abuse is an important health and safety issue in Europe.Yet the alcohol excise is a rather blunt instrument to restrain alcoholabuse: the consumption of heavy drinkers is not reduced(because alcoholics cannot control their behaviour), and the welfareof moderate drinkers is reduced. Therefore, regulatory measuresaimed at specifi c problem groups, such as young peopleand heavy drinkers, should complement the excise instrument.Cost-effective measures that have a demonstrably positive effecton alcohol abuse include restrictions on the sale and purchaseof alcohol, coupled with server legal liability rules for sellers ofalcoholic beverages to minors and drunken people. The Dutchcampaign to discourage drunk driving may do more harm thangood by suggesting that fellow-passengers may be stone drunk—so long as the driver is sober.Can gambling still be taxed?High gambling taxes reduce the welfare of non-addicted playerswithout restraining the behaviour of problem gamblers. Taxes ongames of chance, such as lotteries, disproportionately burdenlower-income groups, while the revenues often benefi t culturalevents, which benefi t higher-income groups. In the present situation,gambling addicts can exercise their habit unrestrained anduntaxed on the internet, while recreational non-addicted casinovisitors have to pay a high price to wager an occasional bet. Accordingly,a minimum level of protection for problem gamblersmay be more effective than a minimum level of taxation on gamesof chance.More information: sijbren.cnossen@cpb.nl
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