Can cigarette taxes during pregnancy mitigate the intergenerational transmission of socioeconomic status?

Abstract

Smoking during pregnancy is most prevalent among women with a low socioeconomic status and is negatively associated with important infant health measures such as birth weight. Cigarette taxes decrease smoking among pregnant women and lead to improved birth outcomes, especially among those with a low socioeconomic status. In this paper we investigate whether increasing cigarette taxes also translates into improved educational attainment of offspring from a low socioeconomic background. In order to answer this question, we exploit variation in cigarette taxes across U.S. states over time and analyze tax effects on grade retention and school enrollment among a large sample of adolescents representative of the population. We find that higher cigarette taxes during pregnancy are strongly associated with improved educational outcomes of children from a low socioeconomic background, but seem to have no effect on children from a higher socioeconomic background. Our findings therefore suggest that cigarette taxes can be an effective policy instrument for mitigating the propagation of a low socioeconomic status from one generation to the next.