IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/4763.html
   My bibliography  Save this paper

Interstate Cigarette Bootlegging: Extent, Revenue Losses, and Effects of Government Intervention

Author

Listed:
  • Marie C. Thursby
  • Jerry G. Thursby

Abstract

In this paper, we develop and estimate a model of commercial smuggling in which some, but not all, firms smuggle a portion of the cigarettes they sell. The model is used to examine the effects on interstate cigarette smuggling of the Contraband Cigarette Act and a change in the federal excise tax. We find that both policies have unintentional effects. While the Contraband Cigarette Act was imposed to reduce interstate smuggling, we find it had the opposite effect. In contrast, an increase in the federal tax is not intended to affect smuggling, but we find it increases the portion of cigarette sales that is commercially smuggled.

Suggested Citation

  • Marie C. Thursby & Jerry G. Thursby, 1994. "Interstate Cigarette Bootlegging: Extent, Revenue Losses, and Effects of Government Intervention," NBER Working Papers 4763, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4763
    Note: ITI
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w4763.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-1395, November.
    2. Lewit, Eugene M. & Coate, Douglas, 1982. "The potential for using excise taxes to reduce smoking," Journal of Health Economics, Elsevier, vol. 1(2), pages 121-145, August.
    3. Badi H. Baltagi & Rajeev K. Goel, 1987. "Quasi-Experimental Price Elasticities of Cigarette Demand and the Bootlegging Effect," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(4), pages 750-754.
    4. Baltagi, Badi H & Levin, Dan, 1986. "Estimating Dynamic Demand for Cigarettes Using Panel Data: The Effects of Bootlegging, Taxation and Advertising Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 148-155, February.
    5. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-1294, September.
    6. Marie Thursby & Richard Jensen & Jerry Thursby, 1991. "Smuggling, Camouflaging, and Market Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 789-814.
    7. Wasserman, Jeffrey & Manning, Willard G. & Newhouse, Joseph P. & Winkler, John D., 1991. "The effects of excise taxes and regulations on cigarette smoking," Journal of Health Economics, Elsevier, vol. 10(1), pages 43-64, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Devereux, M.P. & Lockwood, B. & Redoano, M., 2007. "Horizontal and vertical indirect tax competition: Theory and some evidence from the USA," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 451-479, April.
    2. Leonzio Rizzo, 2008. "Local government responsiveness to federal transfers: theory and evidence," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(3), pages 316-337, June.
    3. Chiou, Lesley & Muehlegger, Erich, 2008. "Crossing the Line: The Effect of Cross Border Cigarette Sales on State Excise Tax Revenues," Working Paper Series rwp08-012, Harvard University, John F. Kennedy School of Government.
    4. Rizzo, Leonzio, 2005. "Interaction between Vertical and Horizontal tax Competition: Theory and Evidence," MPRA Paper 5334, University Library of Munich, Germany.
    5. Austan Goolsbee & Michael F. Lovenheim & Joel Slemrod, 2010. "Playing with Fire: Cigarettes, Taxes, and Competition from the Internet," American Economic Journal: Economic Policy, American Economic Association, vol. 2(1), pages 131-154, February.
    6. Lovenheim, Michael F., 2008. "How Far to the Border?: The Extent and Impact of Cross-Border Casual Cigarette Smuggling," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(1), pages 7-33, March.
    7. Gruber, Jonathan & Sen, Anindya & Stabile, Mark, 2003. "Estimating price elasticities when there is smuggling: the sensitivity of smoking to price in Canada," Journal of Health Economics, Elsevier, vol. 22(5), pages 821-842, September.
    8. Leonzio Rizzo & Alejandro Esteller - Moré, 2011. "US Excise Tax Horizontal Interdependence: Yardstick vs. Tax Competition," Working Papers 201116, University of Ferrara, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hai-Yen Sung & Teh- Wei Hu & Theodore E. Keeler, 1994. "A Dynamic Simultaneous-Equations Model for Cigarette Consumption in the Western States," Public Economics 9403002, University Library of Munich, Germany, revised 04 Apr 1994.
    2. Stehr, Mark, 2005. "Cigarette tax avoidance and evasion," Journal of Health Economics, Elsevier, vol. 24(2), pages 277-297, March.
    3. Charles L. Baum, 2009. "The effects of cigarette costs on BMI and obesity," Health Economics, John Wiley & Sons, Ltd., vol. 18(1), pages 3-19, January.
    4. Jeffrey E. Harris & Beatriz Lopez-Valcarcel, 2004. "Asymmetric Social Interaction in Economics: Cigarette Smoking Among Young People in the United States, 1992-1999," NBER Working Papers 10409, National Bureau of Economic Research, Inc.
    5. 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.
    6. Celidoni, Martina & Pieroni, Luca & Salmasi, Luca, 2014. "Side-effects of anti-smoking policies on health behaviors. Evidence from the US," MPRA Paper 58312, University Library of Munich, Germany.
    7. Hai‐Yen Sung & Teh‐Wei Hu & Theodore E. Keeler, 1994. "Cigarette Taxation And Demand: An Empirical Model," Contemporary Economic Policy, Western Economic Association International, vol. 12(3), pages 91-100, July.
    8. Solmaria Halleck Vega & J. Paul Elhorst, 2015. "The Slx Model," Journal of Regional Science, Wiley Blackwell, vol. 55(3), pages 339-363, June.
    9. Brown, A. Blake & Snell, William M. & Tiller, Kelly, 1999. "The Changing Political Environment For Tobacco -- Implications For Southern Tobacco Farmers, Rural Economies, Taxpayers, And Consumers," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 31(2), pages 1-18, August.
    10. Michael S Sharbaugh & Andrew D Althouse & Floyd W Thoma & Joon S Lee & Vincent M Figueredo & Suresh R Mulukutla, 2018. "Impact of cigarette taxes on smoking prevalence from 2001-2015: A report using the Behavioral and Risk Factor Surveillance Survey (BRFSS)," PLOS ONE, Public Library of Science, vol. 13(9), pages 1-10, September.
    11. Deliana Kostova & Frank Chaloupka & Ce Shang, 2015. "A duration analysis of the role of cigarette prices on smoking initiation and cessation in developing countries," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(3), pages 279-288, April.
    12. Rajeev K. Goel & Michael A. Nelson, 2006. "The Effectiveness of Anti‐Smoking Legislation: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 325-355, July.
    13. Hammar, Henrik & Carlsson, Fredrik, 2001. "Smokers' Decisions To Quit Smoking," Working Papers in Economics 59, University of Gothenburg, Department of Economics.
    14. Badi Baltagi & Rajeev Goel, 2004. "State tax changes and quasi-experimental price elasticities of U.S. cigarette demand: An update," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 28(3), pages 422-429, September.
    15. Jeffrey E. Harris & Sandra W. Chan, 1999. "The continuum‐of‐addiction: cigarette smoking in relation to price among Americans aged 15–29," Health Economics, John Wiley & Sons, Ltd., vol. 8(1), pages 81-86, February.
    16. Craig A. Gallet & John A. List, 2003. "Cigarette demand: a meta‐analysis of elasticities," Health Economics, John Wiley & Sons, Ltd., vol. 12(10), pages 821-835, October.
    17. Sandra L. Decker & Amy Ellen Schwartz, 2000. "Cigarettes and Alcohol: Substitutes or Complements?," NBER Working Papers 7535, National Bureau of Economic Research, Inc.
    18. Ming-Chieh Wang & Tai-Feng Chen, 2016. "Does the spillover of China's economic growth exist? Evidence from emerging markets," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(7), pages 992-1009, October.
    19. C Czart & RL Pacula & RJ Chaloupka & H Wechsler, 2001. "The Impact Of Prices And Control Policies On Cigarette Smoking Among College Students," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 135-149, April.
    20. Elena Raptou & Konstadinos Mattas & Constantinos Katrakilidis, 2009. "Investigating Smoker's Profile: The Role of Psychosocial Characteristics and the Effectiveness of Tobacco Policy Tools," American Journal of Economics and Sociology, Wiley Blackwell, vol. 68(2), pages 603-638, April.

    More about this item

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4763. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.