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Who Pays Cigarette Taxes? The Impact of Consumer Price Search

Author

Listed:
  • Philip DeCicca

    (McMaster University and NBER)

  • Donald Kenkel

    (NBER and Cornell University)

  • Feng Liu

    (Shanghai University of Finance and Economics)

Abstract

We conduct an empirical study of the impact of consumer price search on the shifting of cigarette excise taxes to consumer prices. We use novel data on the prices that smokers report paying and document substantial price dispersion. We find that cigarette taxes are shifted at lower rates to carton buyers and, especially, smokers who buy cartons of cigarettes in a state other than their state of residence. We also find evidence that taxes are shifted at somewhat lower rates to the prices paid by heavier smokers and at somewhat higher rates to the prices paid by smokers of light cigarettes. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Philip DeCicca & Donald Kenkel & Feng Liu, 2013. "Who Pays Cigarette Taxes? The Impact of Consumer Price Search," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 516-529, May.
    • Handle: RePEc:tpr:restat:v:95:y:2013:i:2:p:516-529
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    More about this item

    Keywords

    cigarette taxes; consumers; smokers;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • I1 - Health, Education, and Welfare - - Health

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