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The effects of increases in cigarette prices on cigarette consumption among smokers after the Master Settlement Agreement

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  • Zhen Ma

    (Misericordia University)

Abstract

This paper examines the impact of the large increases in cigarette prices after the Master Settlement Agreement on cigarette consumption among smokers by estimating a dynamic panel data model. I use system generalized method of moments estimator with fixed effects to address the unobserved heterogeneity and the initial conditions problem. I find that older smokers (aged 51 and older) are virtually unresponsive to price changes, and younger smokers (aged 50 and younger) are more price sensitive; women smokers might be more price responsive; and the overall estimated price elasticity for the full sample of smokers is −0.26. In addition, smoke-free air laws do not show significant effects.

Suggested Citation

  • Zhen Ma, 2017. "The effects of increases in cigarette prices on cigarette consumption among smokers after the Master Settlement Agreement," Review of Economics of the Household, Springer, vol. 15(4), pages 1177-1190, December.
    • Handle: RePEc:kap:reveho:v:15:y:2017:i:4:d:10.1007_s11150-015-9290-0
    DOI: 10.1007/s11150-015-9290-0
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    2. Michelle Sovinsky & Liana Jacobi & Alessandra Allocca & Tao Sun, 2023. "More than Joints: Multi-Substance Use, Choice Limitations, and Policy Implications," Rationality and Competition Discussion Paper Series 487, CRC TRR 190 Rationality and Competition.

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    More about this item

    Keywords

    Cigarettes; Smoking; Price elasticity; Dynamic panel model; GMM;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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