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Revisiting the Effects of Cigarette Taxes on Smoking Outcomes

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  • Vinish Shrestha

    (Department of Economics, Towson University)

Abstract

This study re-evaluates the efficacy of cigarette taxation in curtailing smoking. I use recent advancements in the difference-in-differences (DiD) literature to account for heterogeneous treatment effects and compare the findings to the two-way-fixed effect (TWFE) estimates. Using data from the Behavioral Risk Factor Survelliance System Selected Metropolitan/Micropolitan Area Risk Trend (BRFSS SMART) for sample periods 2004-2010 and 2015-2020, the study presents three main findings. First, the results for 2004-2010 sample show that the TWFE estimate is only about 65% of the size of the overall average treatment effect on the treated (ATT) estimate obtained using DiD framework. Second, the event-study type estimates increase gradually in magnitude following the treatment year, thus demonstrating dynamic treatment effects ignored by the TWFE estimate. Third, the ATT estimate pertaining to 2015-2020 sample is only about 63% of the ATT estimate for 2004-2010 sample. Overall, the findings point out that relying on TWFE models to obtain elasticity estimates may bias the estimates towards zero.

Suggested Citation

  • Vinish Shrestha, 2022. "Revisiting the Effects of Cigarette Taxes on Smoking Outcomes," Working Papers 2022-02, Towson University, Department of Economics, revised Oct 2022.
    • Handle: RePEc:tow:wpaper:2022-02
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    References listed on IDEAS

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    More about this item

    Keywords

    Cigarette taxation; Difference-in-Differences; Treatment heterogeneity; Dynamic treatment effects; Elasticity.;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D00 - Microeconomics - - General - - - General
    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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