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Empirical analysis of the impact of cigarette excise taxes on cigarette consumption: estimates from recent state-level data

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  • Richard Cebula
  • Maggie Foley
  • Robert Houmes

Abstract

The adverse health effects from cigarette smoking account for an estimated 443,000 deaths annually in the U.S. Given this circumstance, this study has two objectives. First, it uses a state-level panel data set for a recent time frame to investigate the impact of federal plus state cigarette excise taxes (along with a variety of other factors) on the aggregate consumption of cigarettes. The study adopts a state-level panel data series spanning the period 2002 through 2007, which is the most recent panel for which data for all of the variables are available. Consistent with a number of previous studies, the PLS estimates in this study find that the higher the cigarette excise tax, the lower the aggregate volume of cigarettes consumed. Of course, this outcome does not address the practical problem of the substitution of high nicotine cigarettes for low nicotine cigarettes in the presence of a significant cigarette tax hike. This circumstance leads to the second objective of this study, namely, to propose a general template for a different kind of cigarette excise tax, one that is tied directly to each cigarette brand’s nicotine and tar content. Copyright Springer Science+Business Media, LLC 2014

Suggested Citation

  • Richard Cebula & Maggie Foley & Robert Houmes, 2014. "Empirical analysis of the impact of cigarette excise taxes on cigarette consumption: estimates from recent state-level data," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 38(1), pages 164-180, January.
    • Handle: RePEc:spr:jecfin:v:38:y:2014:i:1:p:164-180
    DOI: 10.1007/s12197-011-9207-6
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    Cited by:

    1. Anna Choi & Dhaval Dave & Joseph J. Sabia, 2019. "Smoke Gets in Your Eyes: Medical Marijuana Laws and Tobacco Cigarette Use," American Journal of Health Economics, MIT Press, vol. 5(3), pages 303-333, Summer.
    2. Aisha Baisalova, 2022. "Exploring Border Effects: Sensitivity of Cigarette Consumption to Excise Tax," CERGE-EI Working Papers wp726, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    3. Nicholas Apergis & Rajeev Goel & James Payne, 2014. "Dynamics of U.S. State Cigarette Consumption: Evidence from Panel Error Correction Modeling," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(1), pages 3-20, March.
    4. Marshall, Emily C. & Saunoris, James & Solis-Garcia, Mario & Do, Trang, 2023. "Measuring the size and dynamics of U.S. state-level shadow economies using a dynamic general equilibrium model with trends," Journal of Macroeconomics, Elsevier, vol. 75(C).
    5. Rajeev Goel & Xingyuan Zhang, 2013. "Gender dynamics and smoking prevalence in Japan," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 37(4), pages 622-636, October.
    6. Rajeev K. Goel & James W. Saunoris, 2019. "Cigarette smuggling: using the shadow economy or creating its own?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(3), pages 582-593, July.
    7. Goel, Rajeev K., 2014. "Economic stress and cigarette smoking: Evidence from the United States," Economic Modelling, Elsevier, vol. 40(C), pages 284-289.
    8. Anna Choi & Dhaval Dave & Joseph J. Sabia, 2016. "Smoke Gets in Your Eyes: Medical Marijuana Laws and Tobacco Use," NBER Working Papers 22554, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Cigarette Smoking; Cigarette Excise Taxation; Nicotine/Tar-Based Tax System; R2; I1; H2;
    All these keywords.

    JEL classification:

    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • I1 - Health, Education, and Welfare - - Health
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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