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The Heterogeneous Geographic and Socioeconomic Incidence of Cigarette Taxes: Evidence from Nielsen Homescan Data

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Author Info

  • Matthew Harding
  • Ephraim Leibtag
  • Michael F. Lovenheim

Abstract

We use Nielsen Homescan data to examine who bears the economic burden of cigarette taxes. We find cigarette taxes are less than fully passed through to consumer prices, suggesting consumers and producers split the excess burden of these taxes. Using information on consumer location, we show the availability of lower-tax goods across state borders creates significant differences in the pass-through rate. Tax avoidance opportunities also have a sizable effect on purchasing behavior by altering consumer search, prices paid and quantities purchased. Finally, we demonstrate that the incidence of cigarette taxes and the border effect varies by household income and education. (JEL D12, H22, H25, H26, H71, L66)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.4.4.169
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 4 (2012)
Issue (Month): 4 (November)
Pages: 169-98

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Handle: RePEc:aea:aejpol:v:4:y:2012:i:4:p:169-98

Note: DOI: 10.1257/pol.4.4.169
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References

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  1. Mark Aguiar & Erik Hurst, 2007. "Life-Cycle Prices and Production," American Economic Review, American Economic Association, vol. 97(5), pages 1533-1559, December.
  2. Burda, Martin & Harding, Matthew & Hausman, Jerry, 2008. "A Bayesian mixed logit-probit model for multinomial choice," Journal of Econometrics, Elsevier, vol. 147(2), pages 232-246, December.
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Cited by:
  1. DeCicca, Philip & Kenkel, Donald & Liu, Feng, 2013. "Excise tax avoidance: The case of state cigarette taxes," Journal of Health Economics, Elsevier, vol. 32(6), pages 1130-1141.
  2. Matthew Harding & Michael Lovenheim, 2014. "The Effect of Prices on Nutrition: Comparing the Impact of Product- and Nutrient-Specific Taxes," Discussion Papers 13-023, Stanford Institute for Economic Policy Research.
  3. Berardi, N. & Sevestre, P. & Tepaut, M. & Vigneron, A., 2012. "The impact of a `soda tax' on prices. Evidence from French micro data," Working papers 415, Banque de France.
  4. Andrew Leicester, 2012. "How might in-home scanner technology be used in budget surveys?," IFS Working Papers W12/01, Institute for Fiscal Studies.
  5. David Agrawal, 2012. "Games within borders: are geographically differentiated taxes optimal?," International Tax and Public Finance, Springer, vol. 19(4), pages 574-597, August.

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