Why Take on the Tobacco Industry: The Political Economy of Government Anti-smoking Campaign

This paper shows that government anti-smoking campaign can benefit the government in the political bargaining with the tobacco industry by reducing the latter's alternative welfare. Although the equilibrium regulation on the tobacco industry increases as a result of government anti-smoking campaign, the political contribution from the tobacco industry will not necessarily go down. Anti-smoking campaign reduces the welfare of the tobacco industry but its potential loss of not lobbying increases. When the incumbent government/politician becomes more hungry for political contribution, it increases its effort in anti-smoking campaign and this could induce more political contribution from the tobacco industry under some plausible conditions. JEL classification: D72, I18