What Does the “Family Smoking Prevention and Tobacco Control Act” Mean to Tobacco Growers?

The “Family Smoking Prevention and Tobacco Control Act” was signed into law on June 22, 2009. The bill grants the Federal Food and Drug Administration (FDA) an authority to regulate the manufacturing and marketing of tobacco products. Tobacco leaf is not subject to the regulation. As a result, it is not apparent what it does mean to tobacco growers. However, since the demand for tobacco is in large part determined by the demand for cigarettes, a change in demand for cigarettes due to the FDA regulation can affect the demand for tobacco. This paper explores the economic welfare consequences of the bill to tobacco growers.