Abstract

Policies restricting gun sales face substantial political opposition and constitutional constraints. We take a different approach: rather than asking whether gun restrictions should be imposed, we ask how much it would cost to compensate potential handgun buyers to choose alternative products. Using a structural model of firearms demand estimated from stated-choice experiments, we estimate the distribution of willingness-to-accept (WTA) for substituting away from handguns toward long guns or no gun purchase. Because handguns account for the majority of firearm deaths in the United States, substitution away from handguns may have meaningful public health implications. We find that targeted compensation can induce substantial substitution at relatively modest cost, while uniform subsidies are far less cost-effective due to windfall payments to inframarginal buyers. Our results highlight scope for compensation-based policies to reduce externalities while leaving buyers better off.

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